ResMed investors wake up to its potential on quarterly results

This is a solid buy for global exposure, income and steady growth.

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Dual-listed ResMed Inc. (CHESS) (ASX: RMD) (NYSE: RSMD) jumped more than 3% higher in early trade this morning after it announced record revenue for the quarter ended March 31, 2014.

Total revenue was US$397.8 million a 4% increase on the corresponding quarter in 2013. For the corresponding nine-month period total revenue was also up 4% and earnings per share were up an impressive 11%.

Investors have been worried that changes to the Medicare regulatory framework in the U.S could adversely affect sales of its key sleep apnea products as independent American distributors are forced to claim markedly lower reimbursement rates. The U.S government has been undertaking a serious cost-cutting drive in the wake of its gaping fiscal deficit, although with the effects of that now fully adjusted into ResMed's business model it may be about to power up again. Revenues in the U.S were flat, but given the changing market conditions that is not a bad result, with a potential outlook for a return to growth.

Moreover, ResMed is a truly global business with nearly half of all revenues now coming from outside the Americas, with Europe and the Asia Pacific areas showing serious promise. In particular European health spends are growing as the continent shakes off the impacts of the Great European Recession and returns to growth, this could be great long-term news for ResMed share owners.

It's an innovative business with a big research and development spend to ensure it stays on top of the game in the massive sleep disorder market. An estimated 50-70 million adults in the U.S have sleep disorders, representing around 20% of the population and these stats could be expected to be similar worldwide.

This quarter's results again emphasised ResMed's potential with its ability to maintain margins contributing to a bottom-line bulge. Operating profit, net income and earnings-per-share all grew year-on-year at a faster rate than revenue. A good sign for a business expanding rapidly.

The quarterly dividend is US0.25 cents per share payable to shareholders on the register as at May 20, 2014.

Foolish takeaway

ResMed remains a solid long-term investment for Australians looking to get exposure to a global growth business with the tailwinds of increasing healthcare spends and changing demographics. It has a rock-solid balance sheet and selling for $5.25 looks reasonable value with the bonus of a consistent quarterly dividend with potential to steadily increase.

Motley Fool contributor Tom Richardson owns shares in ResMed. You can provide feedback on twitter @tommyr345  

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