Masimo Tops Q2 Earnings on High Revenues, Outlook Raised - Analyst Blog

Masimo Corp MASI reported adjusted earnings of 43 cents per share in the second quarter of 2015, which beat the Zacks Consensus estimate by 6 cents and surged 72% on a year-over-year basis driven by substantial revenue growth.
 

Masimo Corporation - Earnings Surprise | FindTheBest

 

Quarter Details

Revenues increased 10.5% year over year to $155.7 million, which easily surpassed the Zacks Consensus Estimate of $149 million.

Product revenues improved 10.6% year over year to $147.6 million, while revenues from royalty were up 9.2% to $8.1 million. Volatile foreign exchange rate impacted Product revenues by approximately $5.5 million in the quarter.

Worldwide direct product revenues (84.7% of product revenues) increased 10.4% on a year-over-year basis. OEM sales (15.3% of product revenues) rose 11.5% on robust sales of sensors and licenses. Masimo rainbow revenues advanced 16.3% to $13.5 million, driven by strong licensing and sensor revenues.

SpHb revenues moved up 37% to $4.4 million backed by strong licensing revenue growth. Masimo believes this to be a leading indicator for future sensor utilization growth.

During the second quarter, SET pulse oximetry and rainbow Pulse CO-Oximetry unit shipments (excluding handheld units) totaled 44,300. Per Masimo, worldwide installed base as of Jul 4, 2015, stood at 1,362,000 units, up 8.1% from 1,260,000 units as of Jun 28, 2014.

Product Update/Launches/Deal wins

Masimo continues to win contracts based on its strong product portfolio. During the quarter, Singapore-based Changi General Hospital selected several products like Root, Radical-7, rainbow, SedLine and ISA capnography of the company.

Turkey, Malatya-based Turgut Ozal Medical Centre Liver Hospital chose Masimo’s Root, SpHb, PVI and SedLine brain function monitor. Masimo also sold approximately 500 EMMA capnography mobile units to New South Wales Ambulance Service in Australia.

Meanwhile, in June this year, Masimo received CE Marking for its Root connectivity and patient monitoring platform integrated with non-invasive blood pressure and temperature capabilities.

Masimo also received CE Mark approval for its MightySat Rx fingertip pulse oximeter – used to spot-check oxygen saturation (SpO2) and pulse rate (PR) in adult and pediatric patients. The non-invasive oximeter, which can also be used during motion and low perfusion, is a first of its kind wireless device.

Guidance

Encouraged by its strong second-quarter performance, Masimo updated its adjusted EPS and revenue guidance for full-year 2015.

The company now projects total revenues of $621 million, up from $608 million. Product revenues are expected at $592 million, up from $580 million estimated earlier. Royalty revenues are projected at $29 million, up from the previous guidance of $28 million.

Masimo continues to expect product gross margins to improve in the second half of 2015. The company reiterated its 2015 gross profit margin guidance at approximately 65%. Management also maintained its operating expense guidance of $306 million.

Masimo projects adjusted EPS of $1.61, up from $1.48 guided earlier.

Our Take

We believe that new products launched over the past 12 months are beginning to make visible contributions to revenues, driven by greater adoption and utilization. Moreover, Masimo’s SET pulse oximetry business represents considerable growth opportunities in international markets.

However, we are concerned about unfavorable foreign exchange rate that will affect both the top and the bottom line in the remainder of 2015 and beyond.

Stocks to Consider

Currently, Masimo carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the medical instruments industry include LDR Holding LDRH, RTI Surgical RTIX and Synergetics USA SURG. All the three stocks sport a Zacks Rank #1 (Strong Buy).

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