Why ResMed Inc. (NYSE: RMD) stock is rising

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ResMed Inc. (NYSE: RMD) stock rose over 2.8% in the pre-market session of January 31st, 2020 (as of 8:03 am GMT-5; Source: Google finance) as the company posted better than expected results for the second quarter of FY 20. For the second quarter, the company reported 22% rise in the Non-GAAP net income to $160.6 million compared with the prior year quarter, mainly due to strong sales, particularly in masks, coupled with controlled operating costs. Cash flow from operations for the second quarter was $69.9 million.

RMD in the second quarter of FY 20 has reported the adjusted earnings per share of $1.21, beating the analysts’ estimates for the adjusted earnings per share of $1.01, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 13 percent to $736.16 million in the second quarter of FY 20, beating the analysts’ estimates for revenue by 1.49%.  In the devices category, the company has delivered a good quarter with year-over-year constant currency device growth of 8% globally underpinned by strong 9% device growth in the United States, Canada and Latin America geographies, as well as due to the improvement in Europe, Asia and rest of world growth, which was at 6% constant currency in the device category. Software as a Service revenue grew 37%, compared to the prior year period, mainly due to continued growth in Brightree service offerings and incremental contribution from the acquisition of MatrixCare, that closed in the second quarter of fiscal year 2019.

Moreover, the revenue in the U.S., Canada, and Latin America, excluding Software as a Service, posted the growth of 14% compared to the prior year period, due to strong sales across the mask and device product portfolios. The revenue in combined Europe, Asia, and other markets posted the growth of 8% on a constant currency basis compared to the same period of the prior year, mainly due to strong mask sales. During the quarter, Non-GAAP gross margin had expanded by 60 basis points over the prior year period, mainly due to benefits from product mix changes and manufacturing and procurement efficiencies, partially offset by declines in average selling prices.

Additionally, during the second quarter the company had paid $56.1 million in dividends. The company has now declared a quarterly cash dividend of $0.39 per share. The dividend will have a record date of February 13, 2020, payable on March 19, 2020.

On the other hand, RMD is now acquiring SnapWorx, which is a privately held software company providing patient contact management and workflow optimization for the sleep apnea resupply market.

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