500 million reasons why ResMed shares are charging higher today

This growing company has big plans and is forecasting strong growth through to the end of the decade.

| More on:
A young woman holds her hand to her mouth in surprise as she reads something on her laptop.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ResMed (ASX: RMD) shares are outperforming the market on Tuesday.

In afternoon trade, the sleep disorder treatment company's shares are up 2% to $35.73.

This compares favourably to a 0.4% decline by the S&P/ASX 200 Index (ASX: XJO).

Why are ResMed shares outperforming?

Investors have been bidding the company's shares higher today following a strong night of trade for its NYSE-listed shares on Monday.

That gain was driven by the release of ResMed's 2030 strategy to drive growth, profitability, and shareholder returns.

There are three key components to its 2023 strategy. The first is to "grow and differentiate ResMed's unmatched core sleep apnea franchise, led by demand generation and demand capture."

Management also aims to "capitalize on ResMed's market opportunity and brand advantage in broader sleep health and breathing health adjacencies."

And finally, research and development (R&D) will continue to be a major focus for the company. It advised that it plans to "invest 7% of revenue into R&D to invent, create, and differentiate a fully integrated digital ecosystem for health technology delivered at home."

In addition to its strategy, ResMed announced its five-year revenue and earnings growth outlook, which reflects its plans to accelerate product and technology innovation, operational excellence, commercial execution, and financial strength.

What was announced?

ResMed revealed that its new strategy is expected to see it help more than 500 million people worldwide achieve their full health potential in 2030.

The company's chair and CEO, Mick Farrell, said:

Today, more than 2.3 billion people suffer from major sleep health and breathing issues, the vast majority of which are undiagnosed. By building on our leadership in connected digital health, our 2030 Strategy will further enable us to transform sleep health, breathing health, and health tech at home through world-class products and digital solutions.

We remain focused on delivering a more integrated and intelligent ResMed ecosystem, transforming the consumer and provider experience to offer better care, simplify the health journey, and improve access to our therapies. As we grow our core sleep apnea market, we will also leverage our strong financial position and expertise in broader sleep health to expand into adjacent markets and accelerate the release of new products at an unprecedented velocity.

Revenue and earnings outlook

Giving ResMed's shares a boost today is its new five-year financial outlook.

The company will be targeting high-single-digit revenue growth and earnings growth that is higher than its revenue growth.

Commenting on its outlook, ResMed CFO, Brett Sandercock, said:

Since our last Investor Day in 2021, we have delivered on our commitments, and this new outlook reinforces that ResMed is well positioned to maintain its track record of strong financial performance. Our financial strength and low capital requirements create robust cash generation, and our capital allocation strategy will continue to prioritize innovation – through reinvestment in our core business, a disciplined and strategic approach to M&A, and a balanced capital return policy. We are confident this approach will deliver significant value to shareholders as we execute our 2030 Strategy.

ResMed shares are now up 55% over the past 12 months.

Motley Fool contributor James Mickleboro has positions in ResMed. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended ResMed. The Motley Fool Australia has positions in and has recommended ResMed. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Healthcare Shares

Two happy scientists analysing test results.
52-Week Highs

3 ASX All Ords health care shares that reached 52-week peaks today

These health care companies finished the week on a positive note.

Read more »

a doctor in a white coat makes a heart shape with his hands and holds it over his chest where his heart is placed.
Healthcare Shares

2 ASX healthcare shares rocketing over 16% on Big US news

These companies are making their shareholders smile on Thursday. But why?

Read more »

Shot of a young scientist looking stressed while conducting medical research in a laboratory.
Healthcare Shares

Should you buy CSL shares after recent weakness?

Does the dip present a buying opportunity?

Read more »

Female pharmacist smiles with a digital tablet.
Healthcare Shares

Sigma shares up 25% in 2 days as Chemist Warehouse merger looks set

The deal continues to create tailwinds for Sigma shares.

Read more »

Shot of a scientist using a computer while conducting research in a laboratory.
Healthcare Shares

'Exciting prospect': 2 ASX pharmaceutical shares to keep a close eye on

These companies have developed new drugs to treat vision loss and erectile dysfunction.

Read more »

a biomedical researcher sits at his desk with his hand on his chin, thinking and giving a small smile with a microscope next to him and an array of test tubes and beackers behind him on shelves in a well-lit bright office.
Healthcare Shares

Guess which ASX 200 healthcare stock is up 12% on big Chemist Warehouse news

Investors appear to believe this news could be a sign that the deal will go ahead.

Read more »

A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face over these rising Tassal share price
Healthcare Shares

Up 630% this year AND profitable! This small ASX healthcare share is glowing

Why has this stock delivered incredible returns this year? Let's find out.

Read more »

Scientists working in the laboratory and examining results.
Healthcare Shares

Can the CSL share price push back above $300?

The biotech last traded there on September 9.

Read more »