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Resmed share prices jumps
Resmed jumps after analyst upgrades
Analysts have started revising their earnings and share price forecasts for sleep apnoea group Resmed following record March quarter earnings, which pushed its shares sharply higher yesterday.

In the quarter, earnings per share rose 29 per cent year on year to $US0.44, buoyed by revenue growth of 11 per cent to $US349.1 million. The pre-tax profit rose 18.3 per cent to $84.0 million.

''It was a quality result, which beat consensus in terms of revenues and margins,'' one analyst said.

Strong gains in the US, which makes up the bulk of revenues, underwrote the growth, while the European market remained sluggish. US sales rose 18 per cent, with non-US sales ahead just 4 per cent.

''Resmed had higher-than-expected gross margin, higher-than-expected interest income and a lower-than-expected tax rate,'' Nomura International analyst Dr David Stanton said.

''We continue to see upside from Resmed's medium and longer-term dynamics in terms of growth from the rollout of home sleep testing in the US and increased focus on associated diseases to obstructive sleep apnoea.''

Both earnings and the share price have struggled over the past 18 months or so due to the strong Australian dollar in particular, since most of its units are manufactured locally.

In response, it has moved production of lower value-added products to Asia, which has helped revive margins, which hit 60.3 per cent in the March quarter.

Even with the improvement in margins, management is hoping that additional cost-reduction initiatives in the supply chain and also manufacturing along with its product mix should help margins continue to expand.

Resmed has net cash of around $US550 million sitting on its balance sheet after spending $US67 million buying back shares during the quarter.

The shares closed up 15 cents at $3.23 in local trading, near the day's high of $3.27.

Nomura has an aggressive price target of $3.50 for Resmed shares.

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