ResMed share price crashes 10% on FY23 earnings miss

ResMed's earnings have fallen short of expectations in FY 2023.

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The ResMed Inc. (ASX: RMD) share price is sinking on Friday morning.

At the time of writing, the sleep treatment company's shares are down 10% to $30.53.

This follows the release of the healthcare company's fourth-quarter and full-year results.

ResMed share price sinks on earnings miss

  • Revenue increased by 18% (21% in constant currency) to US$4.2 billion
  • Gross margin contracted 80 bps to 55.8%
  • Income from operations increased 13% to US$307 million
  • Operating cash flow of US$693.3 million
  • Net income up 18% to US$229.7 million
  • Diluted earnings per share of US$6.09
  • Quarterly cash dividend of US$0.48 per share (4.8 US cents for its ASX CDIs)

For the 12 months ended 30 June, ResMed's revenue jumped a sizeable 18% to US$4.2 billion. This reflects a 24% increase in Americas revenue to US$2,483.4 million and a more modest 4% increase in rest of the world revenue to US$1,241.6 million, which was supported by a 24% jump in ResMed's software-as-a-service revenue to US$498 million.

One disappointment that could be weighing on the ResMed share price was the company's margin performance.

Analysts at Macquarie were expecting improvements in the fourth quarter, but the very opposite happened. ResMed's gross margin contract was 200 basis points for the three months, which dragged its full-year gross margin down 80 basis points to 55.8%.

Management advised that this was mainly due to an unfavourable product mix and higher component and manufacturing costs, which were partially offset by an increase in average selling prices.

This ultimately led to ResMed falling short of the market's earnings per share estimates for FY 2023 by 9 cents.

Management commentary

ResMed CEO Mick Farrell was pleased with the company's performance. He said:

ResMed's fourth quarter and full-year 2023 results reflect strong double-digit growth as we continue to produce and deliver cloud-connected flow generator device volume to meet the ongoing strong global demand from patients, accompanied by high growth of our market-leading patient interface and software solutions.

The combined global supply of our cloud-connected platforms, AirSense10 and AirSense11, have enabled us to support all available customer demand for CPAP and APAP devices across the global market.

The strong growth of our mask and patient interfaces business was supported by new patient setups as well as ongoing resupply activity as we focus on increasing therapy adherence to improve patient outcomes and quality-of-life. Our residential medicine software-as-a-service business continues to achieve high-single-digit growth organically expanding to solid double-digit growth including the contribution from MEDIFOX DAN.

Outlook

No guidance has been provided for the year ahead. However, management appears optimistic on its outlook. Farrell adds:

As we turn to fiscal year 2024, our focus remains on delivering world-leading therapy and digital health solutions so that even more people are able to sleep better, breathe better, and live higher-quality lives outside the hospital, preferably in their own home.

We continue to significantly grow our impact each quarter, improving over 160 million lives in the last 12 months, well on our way to helping 250 million lives in 2025.

The ResMed share price is now down 12% over the last 12 months.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group and ResMed. The Motley Fool Australia has positions in and has recommended Macquarie Group and ResMed. 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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