ResMed Inc. (RMD) reported an EPS of 34 cents in the third quarter of 2011, missing the Zacks Consensus Estimate of 36 cents. However, earnings were 10% higher from the year-ago quarter.
The company reported revenue of $313.3 million, beating the Zacks Consensus Estimate of $311 million and up 12% (same at constant exchange rates, CER) compared with the year-ago quarter.
Based on a favorable product mix and vastly under-penetrated and growing sleep-disorder breathing market, ResMed recorded over 9% growth in the domestic market revenues to $160.5 million. Although this growth was partially offset by declining bilevel sales in Americas, the company remains optimistic based on its recent introduction of next generation S9 bilevel series.
Besides, revenues earned from the international market increased 16% to $152.7 million. Worldwide, the company benefited from strong sales of S9 Autoset and newly launched Quattro FX full face mask and Mirage FX nasal mask.
Gross profit increased 9.5% to $182.5 million, though ResMed witnessed a 158 basis points drag in its gross margin to 58.2% due to a 16.6% rise in cost of sales. Moreover, operating expenses witnessed a 12.5% increase to $118.5 million led by a 27.5% jump in research and development (R&D) expenses and a 10% rise in selling, general and administrative (SG&A) expenses.
The increase in SG&A expenses was mainly due to sales expansion whereas the rise in R&D expenses was partially due to depreciation of the domestic currency against the Australian dollar. Higher expenses led to 200 basis points decline in operating margin to 20.4%.
ResMed exited the quarter with cash and cash equivalents of $671.7 million, up 37.4% from $488.8 million at the end of June 2010. Cash flow generated from operations was $64.0 million.
ResMed is one of the leading players in the market for generators, masks, and related accessories that are used for the treatment of obstructive sleep apnea and related respiratory disorders. The company is focused on medical equipment for the diagnosis and treatment of sleep-disordered breathing. Besides, the industry is benefiting from an aging population and an inclination for availing medical care away from hospitals.
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