ResMed Earnings: Impressive Performance with Strong Device Sales and Sharp Rebound in Gross Margin

Shares in narrow-moat ResMed remain undervalued following a strong third-quarter fiscal 2024. Underlying EBIT of USD 394 million was 8% higher than second-quarter fiscal 2024, with sales up 3% and the underlying EBIT margin expanding 145 basis points to 33%. Sales growth was largely driven by new patient demand while gross margins expanded significantly due to reduced freight and manufacturing cost improvements. Given the quicker-than-expected margin improvement, we increase our fiscal 2024 underlying EBIT forecast by 5% to USD 1.47 billion. Our long-term earnings estimates increase more modestly by roughly 2%. We raise our fair value estimate by 2% to USD 264, or AUD 40 per CDI at current exchange rates.