ResMed: Buying the Dip on a Dividend Champion with a Growth Catalyst

ResMed’s CFO, Brett Sandercock, recently sold 2,000 shares of the company’s stock under a pre-arranged Rule 10b5-1 plan—a move that, while drawing attention, is far from a harbinger of doom. Instead, it’s a disciplined liquidity event that underscores the neutral nature of insider trading when structured properly. Against a backdrop of record financial results and a transformative product launch, this sale is better viewed as a strategic trim, not a signal of distress. Let’s dissect why ResMed (NYSE: RMD) is now a compelling “buy the dip” opportunity.

The CFO’s Sales: A Neutral Event, Not a Sell Signal

Sandercock’s two pre-planned sales—$215k in April 2024 and $230k in March 2025—total just 2.2% of his holdings. His remaining ~90k shares reflect enduring confidence in ResMed’s long-term story. Rule 10b5-1 plans are legally designed to insulate executives from allegations of insider trading, and their use here aligns with prudent wealth management. Notably, no other insiders have sold shares this year, and the dividend remains rock-solid: 14 years of increases, now yielding 1.4% with a 10.4% growth streak.

Q2 Results: A Bullish Foundation

ResMed’s Q2 FY2025 earnings ($2.43 non-GAAP EPS) beat estimates by 13%, driven by a 10% revenue surge to $1.3B. Gross margins expanded 300 basis points to 58.6%, fueled by manufacturing efficiencies. Even after a post-earnings dip of 6.6%, the stock’s 11.2% YTD gain (despite a -0.7% sector lag) highlights investor patience.

Analysts Split, but Bulls Have the Data

Citi’s upgrade to “Buy” with a $265 price target (vs. current ~$230) is no accident. The firm cites ResMed’s $309M operating cash flow (up 45% Y/Y), debt reduction, and its NightOwl home sleep test—which now drives 9% growth in the critical sleep devices segment. Meanwhile, Stifel’s “Hold” hinges on CPAP market saturation and rising GLP-1 drug competition. But here’s the rebuttal:

• NightOwl’s Impact: Launched in 2025, this FDA-approved diagnostic tool has already boosted U.S. sales by 12% in Q2. Its 59.2% non-GAAP gross margin aligns with ResMed’s high-margin playbook.
• Global Sleep Crisis: ResMed’s survey of 30K+ patients across 13 markets shows 3 nights of sleep loss weekly—a $20B opportunity for its solutions.
• Margin Resilience: Even with geopolitical headwinds, gross margins are expanding, not contracting.

The Contrarian Case: Why the Dip is a Buying Opportunity

The stock’s 6.6% post-earnings drop was irrational given the results. This volatility creates a rare entry point for investors. Here’s the math:

• Fair Value: At ~23x forward EPS (vs. a 5-year average of 26x), ResMed is undervalued. Add in its $33B market cap and a Piotroski 9/9 score (financial health), and the valuation is compelling.
• NightOwl’s Pipeline: With ~2.3B people globally suffering from sleep issues, the home diagnostics market is poised for 15%+ annual growth. ResMed’s first-mover advantage here is massive.
• Dividend Strength: The 14-year streak and 3.8% payout ratio (vs. 100%+ EPS growth) mean dividends are safe and scalable.

Risks? They’re Overblown

Yes, tariffs and China exposure (noted by Mizuho) are risks. But ResMed’s Singapore innovation hub and $933M cash pile mitigate these. Meanwhile, Stifel’s CPAP concerns ignore NightOwl’s diversification into diagnostics—a $2B+ market.

Final Thesis: Accumulate Now, Harvest Later

The data is clear: ResMed’s fundamentals are firing on all cylinders. The CFO’s pre-planned sales are irrelevant noise compared to:

1. Financial Fortitude: 10% revenue growth, expanding margins, and $308M in FCF.
2. Product Dominance: NightOwl’s FDA seal and 12% regional sales growth.
3. Valuation Discount: Trading below its 5-year average despite record metrics.

Action Plan: Use the post-earnings dip to average into positions. Set a target of $260 (Citi’s price target) with a 12-month horizon. The catalysts—NightOwl adoption, dividend hikes, and balance sheet strength—are too powerful to ignore.

In a market obsessed with short-term noise, ResMed is the classic “buy when others are fearful” play. The CFO’s sales? Just a footnote in a story of long-term triumph.

Invest like the insiders who hold 98% of their shares—act now before the bull market in sleep health takes off.