Shares of medical device and digital health company ResMed (RMD) climbed nearly 5% on Tuesday following an upgrade from RBC Capital Markets, which shifted its rating from "Sector Perform" to "Outperform."

The firm also lifted its price target on the stock to $262 from $244, implying a potential upside of roughly 17% from the current share price of $229.

ResMed, which focuses on devices for treating sleep apnea and other respiratory conditions, recently posted strong fiscal fourth-quarter results in August, with sales in its core sleep device segment surpassing market expectations.

RBC analysts cited ResMed's favorable earnings outlook and its increased focus on capital management as key drivers behind the upgrade. The firm projects that ResMed can achieve high single-digit earnings growth over the coming years.