In the previous section of this article, there was a detailed discussion about ResMed and its excellent market position, how well it has been paying dividends (almost always an indication of a mature company), and how its technology is being utilized to treat new indications. In this section, I will conclude with a look at its global growth prospects and its competitors.
Product sales driving growth across geographies for ResMed
One of the most important aspects of ResMed's business strategy is the way it has spread across the globe. The company started out in Australia, so it has a natural edge in that market. However, the company has presence across 20-odd countries and is very prominent in emerging markets like India, China, and Brazil. It also makes more than 40% of its revenue from these markets, including Europe, and about 60% from the U.S.
Its latest earnings were quite impressive. It posted revenue of $414.6 million in the last reported quarter. The year before, it had $372 million -- so that is an 11% increase at constant currency.
Its products, both flow generators and masks, are seeing increasing sales in both home and hospital care. These products are not restricted to the U.S. or Australia alone. ResMed has approvals to sell these products in dozens of countries worldwide. Its revenue being spread across geographies reflects that multi-dimensional approach.
Last quarter, it made $230 million from the U.S. and $184 million from the rest of the world. APAC regions showed double-digit growth in revenue. This tells me that the company is evenly spread out. There was 16% growth in flow generators to $104.7 million, and 7% for masks and other products to $125.6 million. This is also indicative of how its portfolio is performing.
The company's bottom line performed well due to significant growth in operating income, which increased 24% this year. Revenue for the whole year was $1.5 billion, a 12% increase at constant currency. The company has considerable cash reserves of $876 million, and offered a 20% return on equity overall. Broadly, this is a solid company with sound management and strong business approach, and I see long-term benefits from buying into it.
Philips Respironics and ResMed together comprise nearly 70% of the sleep apnea devices market. Philips is a global player that has been in the emerging markets for decades. ResMed has a better chance of fighting its competition in the U.S. market than elsewhere. However, it has done considerably well so far.
Philips Respironics, a subsidiary of Philips, provides innovative solutions for the treatment of sleep and respiratory diseases. It has three groups: sleep and home respiratory, hospital, and international. Sleep and home respiratory includes home respiratory care, SDB, sleep well ventures, and respiratory drug delivery.
In the quarter that ended June 30, health care sales were flat at constant currency at $3.1 billion (2.36 billion euros). This was due to 3% decline in sales from North America and Western Europe, partly offset by 10% year over year growth in sales from China and Latin America.
Philips has seen order in its health care sector grow strongly, and expects to see further upside in 2014. This year, it is enhancing its global reach by partnering with hospitals in Saudi Arabia, the Netherlands, and the U.S. to supply patient monitoring and other equipment.
Another smaller competitor is CareFusion . It has respiratory products, cardiopulmonary diagnostics, sleep diagnostic, and therapy and ventilators. In the quarter that ended March 31, CareFusion reported revenue of $901 million, down 2% at constant currency, compared to $919 million same period last year. The decrease was due to declining sales of both medical systems and procedural solutions.
Within medical systems, respiratory technologies decreased 8% to $97 million in 3Q, 2013, compared to $106 million in 3Q, 2012. The company's adjusted operating income increased 5% to $201 million, and adjusted EPS was $0.59, up 6%, compared to $0.56 in the same period last year.
CareFusion has announced a $750 million share repurchase program for 2014. This comes on back of a successful share repurchase of $400 million after it announced a buyback program for up to $500 million last year. The company is also entering into contracts with University of Texas MD Anderson Cancer Center, Ochsner Health System, Our Lady of the Lakes Medical Center, and more than 100 other hospitals for new technologies on the Pyxis ES platform.
ResMed aims to offer support systems for patients with congestive heart disease as more than 76% of the cases are caused due to moderate to severe OSA. By performance, ResMed has showed significant sales growth, mostly driven by increasing demand for SDB systems in chronic medical conditions. Its strong financial position and solid dividend policy should support its earnings potential in the future.