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ResMed Inc. (CHESS) reports strong sales growth

The ResMed Inc. (CHESS) (ASX: RMD) share price will be one to watch this morning after the sleep treatment company released its second-quarter results.

In after-hours trade in the United States its NYSE-listed shares are up a sizeable 12% at the time of writing.

Here are a few highlights from its second-quarter (U.S. dollars):

  • Second-quarter net revenue of $601.3 million, up over 13% on the prior corresponding period. First-half revenue came in at $1,124.9 million, up a touch under 13% on the first-half of FY 2017.
  • Gross profit of $349.8 million in the second-quarter and $655.4 in the first-half. Both were an increase of approximately 13% on the prior corresponding periods.
  • Quarterly net income of $9.5 million, down from $76.7 million due to a one-time additional income tax expense of $119.9 million. First-half net income $95.7 million.
  • First-half non-GAAP earnings per share of $1.66, up 24% on the prior corresponding period.

Overall I thought this was yet another outstanding quarter from this high quality company and I can’t say I’m surprised to see its US-listed shares surge higher in after-hours trade.

According to CEO Mick Farrell, strong growth was seen across the board. Stating that: “Our masks have performed well around the world, device sales are solid, and our cloud-based software continues to grow rapidly. Our operating excellence initiatives are achieving leverage in the business with more runway ahead.”

The company’s second-half could be given an extra boost from the launch of the first ResMed branded portable oxygen concentrator.

The product, called Mobi, will launch this quarter and management believes it “exemplifies patient-centered innovation and our commitment to pioneer products and create value with services and solutions that improve patients’ quality of life, reduce the impact of chronic disease and save healthcare costs globally.”

U.S. tax reform.

The U.S. tax reform has imposed a one-time transition tax on unremitted foreign earnings that has hit ResMed’s results.

According to the release, the one-time transition tax on unremitted foreign earnings results in additional income tax expense of $119.9 million, of which $10.5 million has been recorded as income taxes payable and $109.4 million has been recorded as long-term income taxes payable.

Should you invest?

I think this result goes to show why many regard ResMed as one of the best healthcare shares on the ASX alongside the likes of CSL Limited (ASX: CSL) and Ramsay Health Care Limited (ASX: RHC).

Considering its strong management team and equally strong long-term growth potential, I would suggest investors consider snapping up shares today for a buy and hold investment.

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Motley Fool contributor James Mickleboro has no position in any of the stocks 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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