The Resmed CDI (ASX: RMD) share price spiked more than 8.5% last Friday following an upbeat quarterly business update from the company. The strong result has attracted a series of share price upgrades from big brokers. Here's the rundown.
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First quarter update
Resmed's quarterly update reflected positive trends across the business and an all round solid performance. Its revenues increased 10% to $751.9 million, up 9% on a constant currency basis while net operating profit increased 27%.
"During the quarter, we continued to support the global COVID-19 pandemic response, providing ventilators, masks, and circuits to countries in need around the world," said Mick Farrell, Resmed's CEO. The company's 9% increase in revenue was driven by strong sales in its mask product portfolio and increased demand for ventilators, partially offset by a decrease in demand for its sleep devices.
Revenue in combined Europe, Asia and other markets grew by 10% on a constant currency basis, primarily driven by sales across device and mask product portfolios, including increased demand for ventilators due to COVID-19.
The business also experienced a 7% decrease in selling, general and administrative expenses for the quarter. These expenses improved to 21.1% of revenue compared to 24.6% in the same period of the prior year. These changes were mainly due to savings in travel and other cost management measures as a result of the pandemic.
Broker upgrades
The Resmed share price is in recovery mode following a disappointing FY20 result back in August. The positive Q1 update has enabled the ASX share to claw back most of its August sell down.
A series of broker updates came about on Monday after the quarterly was digested. Credit Suisse Group AG (NYSE: CS) raised the Resmed share price target from $28.00 to $31.00 and upgraded its rating from neutral to outperform. It anticipates a strong uptick in earnings growth as COVID-19 supports key healthcare segments where the company operates.
Macquarie Group Ltd (ASX: MQG) also upgraded its rating from underperform to neutral and raised its Redmed share price target from $20.00 to $27.25. It notes a significant rebound in the underlying business in September and upgraded earnings forecasts.
Finally, Morgan Stanley (NYSE: MS) raised its Resmed share price target from $25.90 to $27.00 and retained an equal weight rating. The quarterly trading update came out ahead of its expectations.
