Pinned straw:
Early US analyst responses shown below, with SP up 10.10% on NYSE to $236.10 in overnight trade.
Average 12m Price Target is now +11.46% to closing SP. (I think that's modest)
Overall, we are 18 months into an upgrade cycle representing the unwinding of the GLP-1 scare.
The recent drawdown was a good opportunity to top up (yay) but I think we're still seeing reasonable value from here, as the forward P/E at 25.5x represents a solid discount to the 5-year average of 45x (which I think is a bit rich and is exaggerated by when SP went crazy during the pandemic, so i think 40 is a better "average".).
I've nothing much to add to the various posts yesterday by other Strawpeople. Other than to observe:
1) that the slighty higher SG&A was noted as being due to the major rebranding that's been rolled out.
2) Mick also seemed to be preparing the market for some "tuck in acquisitions" - I've added the script relating to this from the Q&A, at the bottom of this post. The increase in buyback indicates this will be modest, but of course they have a LOT of balance sheet capacity, so who knows. If 10% market cap is an upper limit, then that's still USD3.5bn.
Price Target Increases
Price Target Decreases
Mick's Q&A Response on M&A.
"Yes. And I'll just fully in line with Brett there, use of capital, dividend, share buyback, actually the best investment is investing back in the business, which we do at 6% to 7% back into R&D and 19% to 20% there in SG&A. But look, the money is not burning a hole in our pocket. Obviously, we generated incredible free cash flow of $558 million for the quarter, $1.6 billion of free cash in the trailing 12 months. But we do look at M&A as an interesting area to accelerate our growth towards our 2030 strategy.
So as we look at M&A, we're looking at tuck-ins sort of some 10%, sub-5% even of our market cap, some 1%, I'd call it a definite tuck-in. There are a number on our radar screen. Nothing to announce here on this earnings call. It may not be too far before we announce something. We are actively out there. But I'll say this, the acquisitions that we look at have to meet 3 criteria: number one, they're in line with our 2030 strategy, that they're going to help us be the world leader in sleep health, breathing health and health care technology delivered at home.
Two the financials have to be there, there is to be an ROI, has to get the ROIC to the WACC at an appropriate period of time. We have to have free cash flow. And we have to be the best owner of that asset. We have to be a better owner of the asset than the current owners in terms of expanding globally, expanding it around the U.S. and expanding to all the 140 countries we're in.
And thirdly, it's going to be a cultural fit. It's going to be aligned with ResMed's ethics integrity, doing the right thing when no one's watching and beyond. So watch this space, nothing to report but I'm really excited to be upping the share buyback and watch this space for the tuck-in M&A over the coming 6, 12 months."
Disc: Held
ok been through result, only add
- Mick believes its a matter of life or death decision to get a device......had me scared lol, cant doubt his conviction
- GM better and CFO said more to come over time
- tariffs--they believe they are exempt under the agreements re Med Dev, may not hold for China/Mexico--if true, would give them a pricing advantage in the US given the production base of competitors.
this tariffs work that we've been doing here at ResMed has gone back a long way. And if you look at the history of this, that was 1982 this legislation was first put in place by the Reagan administration, was reaffirmed in 1989 under H. W. Bush, and then in 2009, ResMed actively worked with CBP, which is the Customs and Border Protection to get official recommendation for us to be with some tariffs at the time then in 2008-2009 that we're looking at being put in place.
And we will give the full tariff exemption then. We went back here in 2025, just earlier this month and got reaffirmation that from Customs and Border Protection that our tariff exemption supply under this protocol, sometimes called the Nairobi Protocol, and we're fully there.
As for our competitors, particularly coming from hot band countries where tariffs are in the triple-digits, I would ask you to go talk to them to speculate on that. I think it will be very different for players. We're coming in from Australia and Singapore, two very friendly U.S. nations that have long-standing relationships and very good approaches.
Thanks Mike, yet to go through the details, but about to. Noted the GM, non-GAAP (blue) and GAAP both positive for the quarter. Have added aggressively to this one on the dip.
