RMD fell another -4.2% on Monday compounding the -9.3% drop on Friday following its report as weaker margins hit earnings overnight – we hold RMD in our Flagship Growth Portfolio.
The problem for investors was a 4Q revenue print a touch below consensus was accompanied by weaker margins when the market was looking for expansion. A lack of predictability has been penalised elsewhere in the healthcare space, we believe it’s arguably unfair on RMD to be tarred with the same brush but bargain hunters are currently thin on the ground when companies disappoint even when value appears to emerge – more on the Healthcare Sector later in today’s report as it’s been a tough 1H23 e.g. year-to-date CSL is -8.9%, RMD -5% while Ansell is down -15.1%.
- While we are unlikely to increase our position in RMD, we intend to hold it and can see a plausible pathway for RMD to again expand margins which will drive earnings, noting that the top line did show strong growth
MM is long and cautiously bullish toward RMD
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