ResMed's 3Q gross profit margin (GPM) and operating profit margin surprised Morgans to the upside, as inventory levels were reduced to the lowest level in years to better match demand, and manufacturing efficiencies increased.

Double-digit bottom line gains were achieved on the improving GPM, operating leverage, and strong cash flow, explains the broker. Masks grew above market on new patient set-ups and resupply, while devices met the broker's expectations despite softer ex-US sales.

Management flagged Red Sea headwinds, while investments are needed in marketing and demand generation.

The Add rating is maintained and the target price rises to $34.11 from $32.82 after Morgans raises FY24-26 earnings forecasts by around 3%.

Sector: Health Care Equipment & Services.

Target price is $34.11.Current Price is $32.39. Difference: $1.72 - (brackets indicate current price is over target). If RMD meets the Morgans target it will return approximately 5% (excluding dividends, fees and charges - negative figures indicate an expected loss).

© 2024 Acquisdata Pty Ltd., source FN Arena