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Masimo's (MASI) Q2 Earnings Surpass Estimates, '21 View Up

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Masimo Corporation (MASI - Free Report) delivered adjusted earnings per share (“EPS”) of 94 cents in the second quarter of 2021, up 10.6% year over year. The figure surpassed the Zacks Consensus Estimate by 3.3%.

The adjustments include acquisition, integration and related costs, and litigation-related expenses, settlements and awards, among others.

GAAP EPS for the quarter was 88 cents a share, down by 8.3% from the year-earlier figure.

Revenues in Detail

Masimo registered revenues of $305.1 million in the second quarter, up 1.4% year over year on a reported basis. The figure also surpassed the Zacks Consensus Estimate by 2.9%.

However, at constant exchange rate (CER), revenues declined by 0.1%.

Per management, shipments of non-invasive technology boards and instruments, excluding handheld and fingertip pulse oximeters, were 72,500 in the second quarter of 2021. The company also recorded a strong rebound in sensor sales in the quarter.

Masimo Corporation Price, Consensus and EPS Surprise

Masimo Corporation Price, Consensus and EPS Surprise

Masimo Corporation price-consensus-eps-surprise-chart | Masimo Corporation Quote

Margin Analysis

In the quarter under review, Masimo’s gross profit rose 0.7% to $192.9 million. Gross margin contracted 43 basis points (bps) to 63.2%.

Selling, general & administrative expenses declined 4.7% to $93.8 million. Research and development expenses went up 9.9% year over year to $33.9 million. Adjusted operating expenses of $127.8 million decreased 1.2% year over year.

Adjusted operating profit totaled $65.1 million, reflecting a 4.6% uptick from the prior-year quarter. Adjusted operating margin in the second quarter expanded by 67 bps to 21.3%.

Financial Position

Masimo exited the second quarter of 2021 with cash and cash equivalents of $575.9 million compared with $551.9 million at the end of the first quarter.

Cumulative net cash flow from operating activities at the end of the second quarter was $85.3 million compared with $106.1 million a year ago.

2021 Guidance

Masimo has updated its earlier-provided full-year 2021 financial outlook.

Total revenues are now projected at $1,216 million, reflecting reported growth of 6.3% and CER growth of 5.4%. This is up from the previous view of $1,205 million, which reflected an uptick of 5.4% and 4.5% on reported and CER basis, respectively. The Zacks Consensus Estimate for the metric is currently pegged at $1.20 billion.

Adjusted EPS is projected at $3.85, up from the previous outlook of $3.83. The Zacks Consensus Estimate for the same is pegged at $3.83.

Our Take

Masimo exited the second quarter with better-than-expected results. The company recorded a strong rebound in sensor sales (on the back of steady expansion of monitoring in hospitals), along with robust order shipments, which is encouraging. Expansion of the company’s installed base is also impressive. FDA’s 510(k) clearance of Radius Tº for both prescription and over-the-counter use on patients and consumers above the age of five, along with a slew of favorable studies on Masimo’s products, raises our optimism. Expansion of adjusted operating margin bodes well for the stock. A raised financial outlook for 2021 augurs well.

On the flip side, contraction of gross margin is a concern. The company faces fierce competition from the MedTech bigwigs, thus raising our apprehension.

Zacks Rank & Key Picks

Masimo currently carries a Zacks Rank #3 (Hold).

Some better-ranked medical stocks, which are expected to report earnings soon, are AMN Healthcare Services Inc (AMN - Free Report) , Catalent, Inc. (CTLT - Free Report) and West Pharmaceutical Services, Inc. (WST - Free Report) .

The Zacks Consensus Estimate for AMN Healthcare’s second-quarter 2021 adjusted EPS is currently pegged at $1.47. The consensus mark for second-quarter revenues stands at $829.4 million. The company currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Catalent currently carries a Zacks Rank #2. The Zacks Consensus Estimate for Catalent’s fourth-quarter fiscal 2021 adjusted EPS is currently pegged at $1.04. The consensus mark for fiscal fourth-quarter revenues stands at $1.13 billion.

The Zacks Consensus Estimate for West Pharmaceutical’s second-quarter 2021 adjusted EPS is currently pegged at $1.74. The consensus mark for its revenues stands at $665.6 million. The company carries a Zacks Rank #2.