ResMed Inc (ASX: RMD) shares have burst out of the gate on Friday morning.
At the time of writing, the sleep disorder treatment company's shares are up 8% to a new 52-week high of $38.46
Why are ResMed shares racing higher?
Investors have been scrambling to buy the company's shares this morning following the release of its first quarter update.
For the three months ended 30 September, ResMed reported an 11% increase in revenue to US$1,224.5 million. This was largely in line with consensus estimates for the period.
Management advised that this top line growth was driven by increased demand for its sleep devices and masks portfolio, as well as strong growth across its Residential Care Software business.
Revenue in the U.S., Canada, and Latin America, excluding Residential Care Software, grew by 11% for the period. Whereas revenue in Europe, Asia, and other markets, excluding Residential Care Software, grew by 10% in constant currency.
Finally, Residential Care Software revenue increased by 12% on a constant currency basis. This reflects continued organic growth in its portfolio.
Another big positive, which could be lifting ResMed shares today, is the massive improvement in its gross margin.
Management revealed that it improved 420 basis points to 58.6% mainly due to manufacturing efficiencies, component cost improvements, and an increase in average selling prices. Its non-GAAP gross margin increased by 320 basis points to 59.2% due to the same factors. The latter was a touch ahead of consensus estimates.
This ultimately led to ResMed's net income increasing 42% to US$311.4 million and diluted earnings per share increasing 42% to US$2.11 per share.
A quarterly cash dividend of US$0.53 per share (US$0.053 per share for its ASX-listed CDIs) was declared for the quarter.
Management commentary
ResMed's chair and CEO, Mick Farrell, was rightfully pleased with the company's performance during the quarter. He said:
Our first-quarter fiscal year 2025 results reflect ongoing momentum and strong execution across all areas of our business. We delivered 11% year-over-year revenue growth, and our focus on operational excellence resulted in another quarter of year-over-year margin expansion and a 34% increase in operating profit.
As we celebrate 35 years of growth and innovation, our recently launched 2030 strategy will further enable us to transform sleep health, breathing health, and healthcare technology at home. By building on our leadership in connected digital health, we are driving better care, simplifying the health journey, and improving access to our therapies globally so even more people worldwide are empowered to live healthier, higher-quality lives using products and services they love.
Another great quarter for ResMed, which continues to demonstrate that it can grow at a strong rate even after the emergence of weight loss wonder drugs like Ozempic.
ResMed shares are now up 80% from their 52-week low of $21.32.
