Highlights

  • Macquarie Research issued an OUTPERFORM rating on ResMed (ASX: RMD) with a target price of AUD 46.50.
  • ResMed reported 11% Revenue growth to USD 1.4 billion in FY26 Q3, supported by strong device Demand and Margin expansion.
  • Despite strong fundamentals, the stock remains down ~23% over the past year, reflecting broader healthcare sector de-rating pressures.

ResMed CDI (ASX:RMD) has attracted renewed institutional attention following a positive research update from Macquarie, which issued an OUTPERFORM rating with a price target of AUD 46.50. The call comes at a time when the stock is trading at AUD 28.82, significantly below prior highs and still reflecting a negative annual performance of approximately 23%.

The broker upgrade follows ResMed’s FY26 third-quarter results, which highlighted steady revenue growth, expanding margins, and strong cash generation. Despite the recent share price weakness, underlying operational performance continues to show resilience across key geographies and product categories.

Share Performance Reflects Sector De-rating Despite Operational Strength

Over the past year, ResMed’s share price performance has been under pressure, declining nearly a quarter despite consistent Earnings delivery. This divergence between fundamentals and market performance reflects broader sentiment challenges in global healthcare and medical device equities, where valuation compression has been a recurring theme.

At AUD 28.82, the stock is trading significantly below implied broker valuation levels, suggesting that market expectations have remained conservative despite improving operational metrics. Trading activity around earnings announcements has remained elevated, indicating continued investor engagement with the stock’s long-term healthcare demand narrative.

Macquarie OUTPERFORM Rating: Confidence in Structural Growth

Macquarie Research’s OUTPERFORM rating with a AUD 46.50 target price signals renewed confidence in ResMed’s medium-term earnings trajectory. The upgrade reflects expectations of sustained revenue growth, margin expansion, and continued Leadership in sleep and respiratory care markets.

FY26 Q3 Earnings: Strong Revenue and Margin Expansion

ResMed reported revenue of USD 1.4 billion for the third quarter of FY26, representing 11% growth year-on-year and 8% on a constant currency basis. Growth was primarily driven by increased demand across its portfolio of sleep devices, masks, and accessories.

The U.S., Canada, and Latin America region remained the largest contributor, with revenue increasing by 9% excluding software operations. Europe, Asia, and other international markets also recorded steady growth of 7%, reflecting broad-based demand across developed healthcare systems.

One of the most notable aspects of the results was the significant improvement in profitability metrics. Gross margin expanded by 290 basis points to 62.2% (GAAP) and 62.8% (non-GAAP), driven by component cost improvements, Manufacturing efficiencies, and favorable product mix dynamics.

Operating Income also showed strong momentum, increasing by 17% on a GAAP basis and 18% on a non-GAAP basis. This reflects improved Operating Leverage as revenue growth translated efficiently into earnings expansion.

Earnings Per Share and Cash Flow Strength

Net Income for the quarter stood at USD 399 million, while Diluted Earnings per Share reached USD 2.74. On a non-GAAP basis, net income increased to USD 417 million, with diluted EPS rising to USD 2.86, reflecting stronger underlying profitability trends.

Operating Cash Flow remained a key strength, reaching USD 554 million, significantly exceeding net income levels. This strong cash conversion highlights the company’s ability to translate earnings into Liquidity, supporting both reinvestment and Shareholder returns.

During the quarter, ResMed returned USD 262 million to shareholders through dividends and share repurchases, reinforcing its Capital return framework. The combination of dividends and Buybacks continues to position the company as a consistent capital allocator within the healthcare sector.

Operational Developments and Strategic Expansion

Beyond financial performance, ResMed continues to invest in long-term operational capacity and product innovation. The company announced expansion plans for its U.S. distribution network with a new Facility in Indiana, scheduled to begin operations in 2027. This Investment is expected to strengthen logistics capabilities across North America, improving Supply chain efficiency.

Product innovation also remains a core driver of growth. The launch of new mask systems, including the AirTouch F30i variants, reflects ongoing efforts to expand its respiratory care portfolio and improve patient compliance outcomes.

Additionally, the company’s global sleep survey, which included responses from 30,000 participants across 13 countries, highlights growing awareness of sleep health and its potential to expand the addressable market for sleep disorder treatments.

Capital Management and Dividend Policy

ResMed continues to maintain a disciplined capital allocation framework. The board declared a quarterly dividend of USD 0.60 per share, reflecting steady income generation and shareholder return consistency.

Alongside dividends, the company also repurchased shares during the quarter, signaling confidence in long-term earnings stability. The combination of buybacks and dividends reflects a balanced approach between reinvestment and capital return.

The company’s strong operating cash flow provides flexibility to sustain this capital management strategy while continuing to invest in innovation and infrastructure expansion.

Risks and Considerations

While ResMed continues to demonstrate operational strength, several factors remain relevant for Market Participants. Revenue growth is sensitive to healthcare reimbursement dynamics, competitive pressures in medical devices, and macroeconomic conditions affecting elective healthcare demand.

Additionally, currency fluctuations continue to impact reported earnings given the company’s global revenue base. While constant currency growth remains strong, foreign exchange Volatility can influence headline financial results.

Investment in infrastructure and acquisitions also introduces execution risk, particularly as the company expands distribution capabilities and integrates acquired Assets.

Conclusion

ResMed CDI (ASX: RMD) presents a case of strong underlying Business performance contrasted with weaker share price momentum over the past year. The Macquarie OUTPERFORM rating with a AUD 46.50 target price reflects renewed confidence in the company’s earnings trajectory, margin expansion, and global leadership in sleep and respiratory care markets.

FY26 Q3 results reinforced the company’s ability to deliver double-digit revenue growth, strong profitability improvements, and robust cash flow generation. While market sentiment has remained cautious, the latest broker assessment suggests a potential re-alignment between fundamentals and valuation expectations over time.

As the company continues to invest in innovation, infrastructure, and global expansion, investor focus is likely to remain on whether sustained earnings delivery can translate into improved market performance in the coming cycles.