Resmed – 2Q19 Earnings

We recommend adding Resmed to your watch list.

RMDis a global company involved in the development and manufacturing of medical products for the treatment of respiratory disorders.  Global mask sales increased 10%+ on the same time last year.

Low returns from new acquisitions, disappointed investors and the soft 2Q19 earnings update resulted in the stock falling by over 10%

It’s difficult to say with certainly where buyers will step back in, but we are confident of the long-term story with Resmed.

The chart below illustrates the lower band where we see deep value for investors willing to take a 1 – 3 year outlook.

Resmed Reports 1Q19 Growth Over 28%

RMD has rallied from $13.75 to $14.75 following last weeks reported strong 1Q19 result, which included EBIT +28% on the same time last year.

The company also delivered robust top-line growth, which came in ahead of market expectations. Gross margins held at 58+%.

We anticipate EPS growing from US$3.70 in FY19 to US$4.50 in FY21 and revenue growing from US$2.9 billion to US$3.5 billion over the same period.



Resmed – Valuation Review

Resmed  should continue to deliver 10% EPS growth per year over the next 2 – 3 years.

However, at 27x F19 earnings and 1.5% yield, the stock looks expensive.

Other names within the Healthcare space such as CSL at 32x and COH at 38x FY19 also, look expensive.

With the above in mind, our base case is that the sector trades sideways and investors should add a covered call option to enhance the returns.



Buy Healthcare Names: CSL, RMD & SHL

Our Algo Engine has triggered buy signals in Sonic Healthcare, Resmed and CSL over the past few trading sessions.

RMD has experienced its first sell-off since rallying from $10 last year to $16 only a few weeks ago.

The ALGO engine is now flagging the new “higher low” at $14 and we suggest buying a 1/2 size allocation here and then waiting to see if we get another ALGO signal to add to the position.

CSL provides good long-term fundamentals. The PE is still expensive, however, 10 – 20% EPS growth is attractive! Accumulate at $180

SHL looks to be good value at $23. We see resistance is $25, so look to sell call options to enhance the return. 

Chart: RMD

Chart: CSL

Chart: SHL



Healthcare – Preferred Holdings

CSL, SHL, RMD & RHC remain our preferred healthcare names.

Resmed is looking a little expensive and we’d like to repurchase on the next retracement.

Sonic Healthcare:  we expect 5 – 8% EPS growth and consider this a good buy/write addition to portfolios.

Ramsey Healthcare – Accumulate with $74 price target

CSL:  15 – 20% EPS growth remains attractive and adding a covered call option enhances the yield.




Resmed – 4Q17 Earnings

Global mask sales were  weaker than expectations, but we see F18 device  and mask growth rebounding.

FY18 revenue is forecast to grow by  of 5%+ and underlying EPS growth in the high single digits.

RMD is trading at 24x F18 EPS and we see the current sell-off as a buying opportunity

We need to give this name a wide range to find support and the buying zone is between $8.50 and $9.25. 1, 2 & 3 years out, the stock will be trading at higher prices. Keep an eye out for the next Algo buy signal in RMD!

Chart – RMD



Time to Take Profits – Resmed

We’ve recently been buying RMD, AMC, ANN, CIM, RHC and TWE.

In particular, RHC is worth holding with a reasonable upside target to $75.00.

The other names mentioned are now at a price point where either taking profit or selling tight covered call options is recommended.

Chart – RMD





Chart Watch – Resmed

We like Resmed as a portfolio holding.  Our Algo Engine triggered a buy signal in November 2016 when RMD was trading at $7.50. With the recent higher low formation at $9.00, we believe the price can extend higher to $10.00 before reaching resistance.

Chart – RMD