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Masimo (MASI) Q1 Earnings and Revenues Beat, Guidance Solid

Zacks Equity Research

Masimo Corporation MASI reported first-quarter 2019 adjusted earnings per share (EPS) of 79 cents, which surpassed the Zacks Consensus Estimate of 75 cents. Earnings improved from the year-ago quarter by 23.4%.

 

The Zacks Rank #3 (Hold) company’s revenues improved 8.8% year over year to $231.7 million and edged past the Zacks Consensus Estimate of $223.6 million.

Masimo Corporation Price, Consensus and EPS Surprise

 

Masimo Corporation Price, Consensus and EPS Surprise | Masimo Corporation Quote

Segmental Analysis

 

Masimo reports through two segments — Product revenues and Royalty, and Other.

 

Product Revenues

 

Product revenues in the first quarter came in at $230.5 million, up 12.8% from the year-ago quarter and 14.3% at constant currency (cc). Per management, shipments of non-invasive technology boards and monitors were a record 63,700.

 

Royalty and Other Revenues

 

Revenues at the segment totaled $1.1 million, significantly down from the year-ago quarter’s $8.6 million.

 

Margin Analysis

 

In the quarter under review, gross profit totaled $151.6 million, up 5.6% year over year. Gross margin was 65.5%, down 200 basis points (bps).

 

Adjusted operating income in the quarter totaled $56 million, up 4.3% from a year ago. Operating margin was 24%, down 100 bps.

 

Research and development expenses totaled $21.4 million, up 9.5%.

 

SG&A expenses in the quarter were $74.2 million, up 5.7%.

 

Guidance Raised

 

For 2019, Masimo expects total revenues of $919 million on a reported basis and $918 million on an adjusted basis, reflecting year-over-year growth of 10.6% at cc. The projected figure is above the previously communicated figure of $912 million. Notably, the guided figure lies above the Zacks Consensus Estimate of $912.9 million.

 

However, management at Masimo doesn’t expect a meaningful contribution from its Royalty and Other revenues unit.

 

EPS is expected to be $3.25 compared with $3.19 stated previously. On an adjusted basis, EPS is anticipated at $3.12, up from the previously stated figure of $3.08. The Zacks Consensus Estimate stands at $3.08, much below the guided figures.

 

In Conclusion

 

Masimo exited the first quarter on a strong note. The company continues to gain from its key Product segment, which witnessed solid growth in the quarter. Notably, the company’s non-invasive technology shipments surged in the quarter. In fact, management foresees increased shipments in the quarters ahead. A raised guidance for 2019 buoys optimism as well. Management is optimistic about Masimo’s recent initiative for hospital automation. The company recently launched its Iris Device Management System in the United States. Additionally, Masimo has launched Doctella to boost its remote care automation platform.

 

On the flip side, Masimo’s Royalty and Other segment saw significant softness in the quarter. 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. The company faces fierce competition from MedTech bigwigs.

 

Earnings of MedTech Majors at a Glance

 

Some better-ranked stocks, which reported solid results this earning season, are Stryker Corporation SYK, Abbott Laboratories ABT and CONMED Corporation CNMD, each carrying a Zacks Rank #2 (Buy). You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

 

Stryker delivered first-quarter 2019 adjusted EPS of $1.88, beating the Zacks Consensus Estimate by 2.2%. Revenues of $3.52 billion were in line with the consensus estimate.

 

Abbott reported first-quarter 2019 adjusted EPS of 63 cents, which surpassed the Zacks Consensus Estimate by 3.3%. First-quarter worldwide sales came in at $7.54 billion, above the Zacks Consensus Estimate of $7.47 billion.

 

CONMED posted first-quarter 2019 adjusted EPS of 57 cents, which exceeded the Zacks Consensus Estimate of 54 cents. Revenues of $218.4 million outpaced the consensus estimate of $213 million.

 

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