CLSA has increased the price target for ResMed (RMD: AU) (NYSE: RMD) to AUD35.00, up from the previous target of AUD34.40 while maintaining an Outperform rating on the company's stock.
The upgrade comes after ResMed reported a strong performance for the fourth quarter of 2024, which saw the company overcome concerns regarding rising freight costs and potential impacts on margins.
ResMed's non-GAAP Net Profit After Tax (NPAT) was in line with consensus estimates. However, after adjusting for a one-time US$15 million equity investment loss, the company's growth was approximately 26% year-over-year compared to the reported 20%.
The growth was primarily driven by robust mask sales in the United States and a favorable product mix. The gross margin for the quarter increased by 338 basis points compared to the previous corresponding period, reaching 59.1%, which was 83 basis points higher than the consensus estimates.
Despite the positive results, there was a noted focus on weaker device growth post-results, which is being scrutinized given the high comparison base from the previous year. CLSA remains cautious about the device segment due to ResMed's significant market share and the uncertainties surrounding long-term competition in the market.
CLSA's revised price target reflects a 2% increase, and the firm's Outperform rating remains unchanged.
InvestingPro Insights
Following CLSA's optimistic outlook on ResMed (RMD: AU) (NYSE: RMD), the company's financial health and market performance provide additional context for investors. ResMed's market capitalization stands at a robust $32.23 billion, reflecting a significant presence in its sector. The company's P/E ratio, a measure of its current share price relative to its per-share earnings, is 31.62, indicating a premium valuation by the market, which aligns with the company's high-quality earnings and growth prospects.
InvestingPro Tips suggest that ResMed has demonstrated a commitment to shareholder returns, having raised its dividend for 12 consecutive years, with the most recent data showing a dividend yield of 0.95%. Additionally, the company's stock has been trading near its 52-week high, with a price 96.85% of the peak, signaling strong investor confidence. It's worth noting that 2 analysts have revised their earnings upwards for the upcoming period, which may be a reflection of the company's robust financial health and potential for continued growth.
Investors interested in deeper analysis will find more InvestingPro Tips on ResMed, with a total of 15 tips available, including insights into the company's debt levels and liquidity. These tips, along with real-time metrics, are accessible through the dedicated InvestingPro platform for ResMed at https://www.investing.com/pro/RMD.
ResMed's solid performance and favorable analyst revisions underscore the company's potential in the face of industry challenges. CLSA's price target increase and strong rating echo the data-driven insights from InvestingPro, painting a picture of a company poised for continued success.
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