Masimo Corporation MASI is likely to gain from solid third-quarter 2019 results and a slew of positive developments. However, the company has been experiencing weakness in its Royalty and Other revenues for a couple of quarters now.
In a year’s time, shares of Masimo have rallied 50.5% compared with the industry’s 13.4% rise. Meanwhile, the S&P 500 Index has risen 19.5%.
With a market capitalization of $8.17 billion, Masimo develops, manufactures and markets a family of non-invasive monitoring systems. The company’s earnings are anticipated to grow 23% over the next five years. In the trailing four quarters, it delivered an average positive earnings surprise of 7.9%.
Let’s delve deeper into the factors that substantiate Masimo’s Zacks Rank #3 (Hold).
Factors to Boost Masimo
In the recently reported third quarter, Masimo delivered a positive earnings surprise of 7%.
Notably, the company delivered adjusted earnings per share (EPS) of 76 cents, which surpassed the Zacks Consensus Estimate of 71 cents. Earnings improved from the year-ago quarter by 26.7%.
Masimo Corporation Price and Consensus
Masimo Corporation price-consensus-chart | Masimo Corporation Quote
Masimo’s revenues rose 8.8% year over year to $229 million and edged past the Zacks Consensus Estimate of $220.9 million.
Product revenues in the third quarter shot up 13.3% from the year-ago quarter and 13.6% at constant currency (cc). Per management, shipments of non-invasive technology boards and monitors increased 2.7% to 60,700 in the quarter.
Reflective of these, Masimo raised its 2019 guidance.
The company now expects product revenues of $932 million, compared with the earlier-communicated figure of $925 million. Notably, this calls for reported growth of 12.3% and cc growth of 13.1%.
Adjusted EPS is now expected at $3.18, compared with the previously-stated $3.15.
Apart from this, in October, Masimo announced that its Radius Capnography, a portable real-time capnograph with wireless Bluetooth connectivity, received CE marking. Additionally, CE mark for the company’s continuous hemoglobin monitoring technology buoys optimism.
What’s Deterring the Stock?
In the third quarter, Masimo’s Royalty and Other revenues totaled $95,000, significantly down from the year-ago quarter’s $8.5 million. In fact, management expects no meaningful contribution from the unit in 2019. Furthermore, Masimo expects foreign currency headwinds in 2019 to impact its top line.
Which Way Are Estimates Headed?
For 2019, the Zacks Consensus Estimate for revenues is pegged at $932.9 million, indicating an improvement of 8.7% from the year-ago quarter’s reported figure. For adjusted earnings, the same stands at $3.17 per share, suggesting growth of 4.6% from the year-ago reported figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space are Conmed Corporation CNMD, Cardinal Health, Inc. CAH and DENTSPLY SIRONA Inc. XRAY, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Conmed has a long-term earnings growth rate of 17%.
Cardinal Health has a long-term earnings growth rate of 6.2%.
DENTSPLY SIRONA has a long-term earnings growth rate of 11.6%.
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