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ResMed Inc. (CHESS) earnings preview: What investors can expect

Sleep treatment specialist ResMed Inc. (CHESS) (ASX:RMD) will release its earnings for the 2nd quarter of the 2018 financial year after the NYSE trading session closes tomorrow morning.

ResMed delivered another excellent operational result for the September 2017 quarter with revenues rising 13% to $US524 million (11% at constant currency). Earnings per share (GAAP) rose 11% over the prior period to $US0.60. The company’s share price rose strongly following the result with the Australian scrip rising from $10.15 on October 26 to an all time high of $11.49 on December 11. However, a minor sell off occurred following ResMed’s arch-rival Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) announcing that it had filed patent infringement proceedings against ResMed in Australian courts.

Q2 expectations

Currently, U.S. analysts’ earnings per share forecasts for the December quarter range from a high of 81 cents a share, to a low of 75 cents a share, with the average consensus being 78 cents a share.

ResMed is expected to continue to perform strongly in both its established and developing markets. During the September quarter, the company saw revenues in the Americas, excluding its Brightree software segment, grow 11% to $US297 million.  The Brightree segment which provides cloud-based software to improve clinical and business performance saw its revenues rise by 15% to $US38 million. Revenue in the combined Europe, Middle East, Africa and the Asia Pacific region rose by 11% on a constant currency basis to $US189 million.  ResMed remains one of the leaders in treating sleep apnea and the strong growth in sleep apnea patient volume has seen sales for the company’s devices, masks and software continually rise. The developing world, in particular China and India remain large markets with low levels of sleep apnea treatments that a company such as ResMed can provide solutions for.

Whilst ResMed’s primary NYSE listing has seen the stock prick price climb to all time highs in 2018, ASX shareholders have not benefitted as the appreciation of the Australian Dollar has outweighed the positive price movements on the U.S. market. ResMed remains one of the best Australian healthcare businesses with a global focus but is far from cheap trading around 28 times projected FY18 earnings. If the company is unable to meet the market’s expectations (see June 17 quarter) a minor selloff would provide investors with a more compelling entry point from a valuation perspective.

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Motley Fool Contributor Tim Katavic has no financial interest in any company mentioned. The Motley Fool Australia has recommended ResMed Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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