California-based ResMed Inc. (RMD), a pioneer in sleep and respiratory disorder related medicines, is set to report its second-quarter fiscal 2015 earnings results on Jan 22. Last quarter, the company had delivered in-line earnings. Let's see how things are shaping up for this announcement.
Factors at Play
Over the last few months, ResMed has launched a series of products and expects to follow them up with additional ones in calendar year 2015. Plans for further international expansion, particularly in Europe and Asia-Pacific, are also on the cards. For Asia-Pacific, ResMed has initiated investment in a dedicated Asia growth initiative with special focus on China and India. Management expects strong growth from these two countries as well as other emerging markets, including Brazil and Eastern Europe, in fiscal 2015.
In addition, ResMed continues to gain from a solid foothold in the huge sleep-disordered breathing (SDB) market. According to the company, several initiatives are now being taken to increase awareness regarding OSA, which in turn, has increased the demand for home-based diagnosis. We believe such increase in demand may eventually lead improved revenues from ResMed's home diagnosis products in the upcoming quarters.
During the quarter to be reported, ResMed launched the AirCurve 10 series platform in the U.S. to provide personalized treatment to patients suffering from sleep apnea. The company also launched the world's first non-contact personal sleep monitoring device – S+. We believe such innovations will expand the company's shares in the core sleep apnea market and will consequently boost its sales in the quarters going forward.
Robust pipeline development also bolsters investors' confidence. In the bilevel range of devices, ResMed expects to launch the AirCurve 10 platform in key global markets in the coming quarters of fiscal 2015.
However, with respect to currency impacts on ResMed's gross margin, on a sequential basis and assuming current exchange rates, management expects to see a minor negative impact on gross margin in the remaining quarters of fiscal 2015. This negative impact will be a result of a weaker euro that will be largely offset by a weaker Australian dollar.
Earnings Whispers?
Our proven model does not conclusively show that ResMed is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: ResMed has an earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 63 cents.
Zacks Rank: ResMed has a Zacks Rank #3 (Hold) which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.
Conversely, we caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Illumina Inc. (ILMN), earnings ESP of +1.28% and a Zacks Rank #2(Buy).
Hologic Inc. (HOLX), earnings ESP of +2.78% and a Zacks Rank #2.
ZELTIQ Aesthetics, Inc. (ZLTQ), earnings ESP of +166.67% and a Zacks Rank #2.
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