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Why the ResMed share price rocketed 15% higher today

The ResMed Inc (ASX:RMD) share price had a very impressive finish to the week.

The sleep treatment-focused medical device company’s shares ended the day 11% higher at $20.65.

At one stage they were up as much as 15% at a record high of $21.45. When its shares hit this level, it meant they had gained a remarkable 56% since the start of the year.

Why did the ResMed share price rocket higher today?

Investors were fighting to get hold of the company’s shares on Friday after it smashed the market’s expectations with its first quarter update.

According to the release, ResMed achieved revenue of US$681.1 million during the quarter. This was a 16.1% increase in on the prior corresponding period.

Thanks to the expansion of its margins, net operating profit increased at an even quicker rate of 19%. This ultimately led to the company reporting earnings per share of 93 U.S. cents.

As you might have guessed from the share price reaction, this was better than the market was expecting. The consensus earnings per share estimate was 87 U.S. cents, whereas the market was forecasting revenue of US$660.87 million.

What were the drivers of the strong result?

ResMed’s CEO, Mick Farrell, revealed that strong growth was delivered from all sides of the business.

He said: “Our global ResMed team delivered another quarter of strong performance in the first quarter of fiscal year 2020 with double-digit topline revenue growth, balanced growth across our businesses and regions, and further improvements in operating leverage resulting in double-digit growth at the bottom line.”

Mr Farrell also revealed that customer demand remains strong, particularly in the mask category.

“We were particularly pleased that strong customer demand for our new products drove high-teens growth in the mask category during the quarter. Through organic growth and targeted acquisitions, we’re driving forward every facet of our business, leading the innovation of devices and software that improve health outcomes, create efficiencies, and reduce overall healthcare system costs,” he added.

As a result, the CEO is confident that the company is on its “way to improving 250 million lives in out-of-hospital healthcare in 2025.”

Also rising strongly on the market today were the shares of Carsales.Com Ltd (ASX: CAR) and Resolute Mining Limited (ASX: RSG). The Carsales share price ended the day 5% higher after guiding to solid growth in FY 2020 at its AGM. Whereas the Resolute share price raced 9.5% higher after reaffirming its production guidance despite issues at its Syama Mine.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended carsales.com Limited and 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 Scott Phillips.

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