On Tuesday, ResMed Inc. (NYSE: RMD) experienced a shift in stock rating, as it was downgraded from Outperform to Perform by Oppenheimer. The change in rating comes after the presentation of the SURMOUNT-OSA dataset at the American Diabetes Association (ADA) on June 21, 2024.
The SURMOUNT-OSA study, which has been a topic of discussion due to its potential impact on the Obstructive Sleep Apnea (OSA) treatment landscape, has shown significant disease remission outcomes. These results stand out even against the backdrop of strong mean Apnea-Hypopnea Index (AHI) reductions. Despite these findings, GLP-1s, a class of drugs referenced in the study, are not yet approved for OSA treatment and do not have reimbursement, indicating that their full impact on the market may not be realized until the second half of 2025.
Oppenheimer suggests that the data from the GLP-1 study is likely to lead to a structural shift in patient preferences and referral patterns, as well as in the choice of therapy for OSA. This anticipated shift could pose challenges for ResMed, as the firm predicts an "airpocket," or a potential period of stagnation or decline, for ResMed's stock. Consequently, the decision was made to move to the sidelines regarding the company's shares.
The downgrade reflects the anticipation of changing dynamics within the OSA treatment market, as new data influences patient and healthcare provider decisions. As the industry awaits the potential approval and reimbursement of GLP-1s for OSA, the implications for companies like ResMed are becoming clearer, prompting adjustments in stock ratings and market expectations.
In other recent news, ResMed has been in the spotlight following a series of developments. Citi has revised its stance on ResMed, downgrading the stock from Buy to Neutral and adjusting the price target to AUD30.00 from the previous AUD36.00. This decision came after the SURMOUNT study revealed that tirzepatide could cause a significant remission in obstructive sleep apnea (OSA) symptoms in patients. Citi also adjusted its earnings per share (EPS) forecasts for ResMed for fiscal years 2024 to 2026, reflecting potential market shifts due to new OSA treatments.
In the earnings arena, ResMed reported robust Q3 results, with a 7% increase in constant currency terms, leading to a group revenue of $1.2 billion. This growth was driven by a 5% increase in device sales and a 10% rise in mask and accessories sales. The company's earnings call highlighted a strategic focus on expanding the sleep and breathing health market and investing in digital health technology. Despite potential headwinds from the Middle East conflict, ResMed maintains a positive outlook, confirming the continuation of its share buyback program.
InvestingPro Insights
In light of the recent downgrade by Oppenheimer, real-time data and InvestingPro Tips provide a broader perspective on ResMed Inc. (NYSE: RMD). The company's market capitalization stands at $26.76 billion, with a P/E ratio of 27.66, reflecting a premium valuation in the market. Despite the short-term setbacks indicated by a 14.17% drop in the one-week price total return, ResMed has demonstrated resilience over the long term with a 6.81% six-month price total return.
From an investor's standpoint, ResMed's consistent dividend growth, with dividends raised for 12 consecutive years and a current dividend yield of 1.05%, signals a commitment to shareholder returns. Additionally, the company's strong fundamentals are underscored by a gross profit margin of 56.51% and robust operating income margin of 28.12% for the last twelve months as of Q3 2024. InvestingPro Tips highlight that ResMed's cash flows can sufficiently cover interest payments, and the company has maintained dividend payments for 13 consecutive years, which could be reassuring for income-focused investors.
For those looking to delve deeper into ResMed's financial health and future prospects, there are several additional InvestingPro Tips available. To explore these insights and make informed investment decisions, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. With the next earnings date set for August 1, 2024, staying informed with the latest data and expert analysis could be beneficial.
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