Resmed Inc (ASX: RMD) shares are down about a third over the past year, but after a strong showing in the fourth quarter, is it time to reassess the stock?
The analysts at Macquarie certainly think so, and have an outperform rating on the shares with a bullish share price target, which I'll get to shortly.
First, let's look at what the company reported late last week.
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Strong fourth-quarter results
Resmed reported that its revenue had increased by 9% to a record US$1.5 billion during the fourth quarter, up 8% on a constant currency basis.
The company also returned US$1 billion to shareholders through share buybacks and dividends during FY26, which was an increase of more than 70%.
Resmed Chief Executive Officer Mick Farrell said of the results:
We closed fiscal year 2026 with strong fourth quarter results, reflecting continued momentum of our global business, sustained demand for our market-leading products, and disciplined execution of our strategy. Year-over-year, we delivered 9% reported revenue growth, 90 basis points of gross margin expansion, and a 16% increase in earnings per share. For full year 2026, our US$1.6 billion in free cash flow enabled us to invest in innovation, strengthen our market leadership, and return more than US$1 billion to our shareholders. As we enter fiscal year 2027, we will leverage our global scale and enhance our digital capabilities to benefit our patients, providers, and customers. We will use our industry-leading portfolio to improve patient outcomes, reduce healthcare costs, and drive long-term profitable growth for our shareholders.
Cash flow for FY26 came in at US$5.7 billion.
Resmed added that it is planning to return more than US$1.85 billion to shareholders through share buybacks and dividends in the current financial year.
The quarterly dividend was also increased by 10% to US66 cents.
The company's sleep and breathing health revenue in the Americas grew 8% during the quarter and by 10% in the rest of the world.
Resmed shares looking cheap
Macquarie said the fourth-quarter results were mixed, with revenue and gross profit in line with consensus expectations, but gross margin lower.
The broker highlighted that the company is expecting double digit year on year gross margin improvement out to 2030, with revenue growing in the high single percentages.
The broker added:
Near-term ventilator impacts aside, the core sleep business remains strong with management confident in medium-term revenue and earnings growth, supported by year on year double-digit gross margin percentage expansion and in spite of GLP-1 fears.
Macquarie increased its price target on Resmed shares from $46.60 to $46.80, well above the current share price of $28.87. Resmed is valued at $41.64 billion.
