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Masimo (MASI) Q2 Earnings Lag Estimates, Margins Rise
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Masimo Corporation (MASI - Free Report) delivered adjusted earnings per share (EPS) of 62 cents in the second quarter of 2023, down 54.1% year over year. The figure missed the Zacks Consensus Estimate by 27.9%.
The adjustments include acquisition, integration and related costs, and litigation-related expenses, settlements and awards, among others.
GAAP EPS for the quarter was 29 cents, down 12.1% from the year-earlier figure.
Revenues in Detail
Masimo registered revenues of $455.3 million in the second quarter, down 19.5% year over year on a reported basis. The figure surpassed the Zacks Consensus Estimate by 0.2%.
The year-over-year decline in revenues primarily resulted from lower revenues from its healthcare and non-healthcare segments.
Per management, shipments of non-invasive technology boards and instruments, excluding handheld and fingertip pulse oximeters, were 64,100 in the second quarter of 2023.
Segmental Details
Masimo derives its revenues from two business sources — Healthcare and Non-healthcare.
Healthcare revenues in the second quarter were $281.1 million, representing a decrease of 21.3% on a reported basis and 20.7% at constant exchange rate (CER). This compares to our projection of $354.6 million of Healthcare revenues in the second quarter.
Non-healthcare revenues in the second quarter were $174.2 million, reflecting a decline of 17% both on a reported basis and at CER. This compares to our projection of $196.8 million of Non-healthcare revenues in the second quarter.
Masimo Corporation Price, Consensus and EPS Surprise
In the quarter under review, Masimo’s gross profit fell 14.3% to $221.2 million. However, the gross margin expanded 291 basis points (bps) to 48.6%.
We had projected 52.9% of gross margin for the second quarter.
Selling, general & administrative expenses decreased 19.4% to $151.7 million. Research and development expenses declined 15.9% year over year to $40.2 million. Total operating expenses of $191.9 million decreased 18.7% year over year.
Total operating profit amounted to $29.3 million, reflecting a 32.6% uptick from the prior-year quarter. The operating margin in the second quarter expanded 253 bps to 6.4%.
We had projected 9.8% of operating margin for the second quarter.
Financial Position
Masimo exited second-quarter 2023 with cash and cash equivalents of $150.7 million compared with $174.1 million at the end of first quarter. Long-term debt at the end of second-quarter 2023 was $888.8 million compared with $897.5 million at the first-quarter end.
Cumulative net cash flow from operating activities at the end of second-quarter 2023 was $24 million compared with $25.6 million a year ago.
Guidance
Masimo has provided its outlook for the third quarter and revised the same for 2023.
For the third quarter, total revenues are projected to be in the range of $475 million-$525 million. The Zacks Consensus Estimate for the metric is currently pegged at $569.9 million.
Healthcare revenues are expected to lie within $305 million to $335 million (reflecting a decline of 7% to growth of 2% on both reported basis and at CER), while Non-healthcare revenues are expected to be between $170 million and $190 million.
Adjusted EPS for the third quarter is projected to be in the range of 50-64 cents. The Zacks Consensus Estimate for the same is pegged at $1.14.
For the full year, total revenues are now projected to be in the range of $2,100 million-$2,200 million, lowered from the previous outlook of $2,415 million-$2,460 million. The Zacks Consensus Estimate for the metric is currently pegged at $2.12 billion.
Healthcare revenues are now expected to lie within $1,300 million-$1,350 million (reflecting a decline of 3% to growth of 1% on both reported basis and at CER). The outlook for Healthcare revenues was in line with the outlook provided when Masimo released its preliminary results in July.
Non-healthcare revenues for the year are continued to be expected in the range of $800 million-$850 million, in line with Masimo’s outlook in its preliminary results.
Adjusted EPS for 2023 is now projected within $3.35-$3.55, lowered from the previous projections of $4.70-$4.80. The Zacks Consensus Estimate for the same is pegged at $4.43.
Our Take
Masimo exited the second quarter of 2023 with better-than-expected revenues. The expansion of the company’s installed base was impressive. Management confirmed that the company gained new hospital customers during the quarter at a record level, which was encouraging. The expansion of both margins in the quarter bodes well.
On the second-quarter earnings call, Masimo’s management confirmed that its Non-healthcare segment’s Hearables category (including headphones and earbuds) was scaled up in the second half of 2022 with the introduction of the Bowers & Wilkins PI7, PX7 and PX8 headphone models. The company has also been witnessing steady growth in its Hearables category on the back of the launch of Denon PerL earbuds with automatic customization of the sound spectrum for personalized listening experience in June. These look promising for the stock.
On the flip side, lower-than-expected earnings and the dismal top-line and bottom-line performances were disappointing. The decline in its Healthcare and Non-healthcare segmental revenues was worrying. Masimo’s lower-than-expected sensor orders during the reported quarter were discouraging.
Zacks Rank & Key Picks
Masimo currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are DexCom, Inc. (DXCM - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
DexCom, carrying a Zacks Rank of 2 (Buy), reported second-quarter 2023 adjusted EPS of 34 cents, beating the Zacks Consensus Estimate by 54.6%. Revenues of $871.3 million outpaced the consensus mark by 4.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DexCom has a long-term estimated growth rate of 42.9%. DXCM’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 28.8%.
Integer Holdings reported second-quarter 2023 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 15.2%. Revenues of $400 million surpassed the Zacks Consensus Estimate by 8.9%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 12.1%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.4%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 15.7%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.2%.
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Masimo (MASI) Q2 Earnings Lag Estimates, Margins Rise
Masimo Corporation (MASI - Free Report) delivered adjusted earnings per share (EPS) of 62 cents in the second quarter of 2023, down 54.1% year over year. The figure missed the Zacks Consensus Estimate by 27.9%.
The adjustments include acquisition, integration and related costs, and litigation-related expenses, settlements and awards, among others.
GAAP EPS for the quarter was 29 cents, down 12.1% from the year-earlier figure.
Revenues in Detail
Masimo registered revenues of $455.3 million in the second quarter, down 19.5% year over year on a reported basis. The figure surpassed the Zacks Consensus Estimate by 0.2%.
The year-over-year decline in revenues primarily resulted from lower revenues from its healthcare and non-healthcare segments.
Per management, shipments of non-invasive technology boards and instruments, excluding handheld and fingertip pulse oximeters, were 64,100 in the second quarter of 2023.
Segmental Details
Masimo derives its revenues from two business sources — Healthcare and Non-healthcare.
Healthcare revenues in the second quarter were $281.1 million, representing a decrease of 21.3% on a reported basis and 20.7% at constant exchange rate (CER). This compares to our projection of $354.6 million of Healthcare revenues in the second quarter.
Non-healthcare revenues in the second quarter were $174.2 million, reflecting a decline of 17% both on a reported basis and at CER. This compares to our projection of $196.8 million of Non-healthcare revenues in the second quarter.
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 fell 14.3% to $221.2 million. However, the gross margin expanded 291 basis points (bps) to 48.6%.
We had projected 52.9% of gross margin for the second quarter.
Selling, general & administrative expenses decreased 19.4% to $151.7 million. Research and development expenses declined 15.9% year over year to $40.2 million. Total operating expenses of $191.9 million decreased 18.7% year over year.
Total operating profit amounted to $29.3 million, reflecting a 32.6% uptick from the prior-year quarter. The operating margin in the second quarter expanded 253 bps to 6.4%.
We had projected 9.8% of operating margin for the second quarter.
Financial Position
Masimo exited second-quarter 2023 with cash and cash equivalents of $150.7 million compared with $174.1 million at the end of first quarter. Long-term debt at the end of second-quarter 2023 was $888.8 million compared with $897.5 million at the first-quarter end.
Cumulative net cash flow from operating activities at the end of second-quarter 2023 was $24 million compared with $25.6 million a year ago.
Guidance
Masimo has provided its outlook for the third quarter and revised the same for 2023.
For the third quarter, total revenues are projected to be in the range of $475 million-$525 million. The Zacks Consensus Estimate for the metric is currently pegged at $569.9 million.
Healthcare revenues are expected to lie within $305 million to $335 million (reflecting a decline of 7% to growth of 2% on both reported basis and at CER), while Non-healthcare revenues are expected to be between $170 million and $190 million.
Adjusted EPS for the third quarter is projected to be in the range of 50-64 cents. The Zacks Consensus Estimate for the same is pegged at $1.14.
For the full year, total revenues are now projected to be in the range of $2,100 million-$2,200 million, lowered from the previous outlook of $2,415 million-$2,460 million. The Zacks Consensus Estimate for the metric is currently pegged at $2.12 billion.
Healthcare revenues are now expected to lie within $1,300 million-$1,350 million (reflecting a decline of 3% to growth of 1% on both reported basis and at CER). The outlook for Healthcare revenues was in line with the outlook provided when Masimo released its preliminary results in July.
Non-healthcare revenues for the year are continued to be expected in the range of $800 million-$850 million, in line with Masimo’s outlook in its preliminary results.
Adjusted EPS for 2023 is now projected within $3.35-$3.55, lowered from the previous projections of $4.70-$4.80. The Zacks Consensus Estimate for the same is pegged at $4.43.
Our Take
Masimo exited the second quarter of 2023 with better-than-expected revenues. The expansion of the company’s installed base was impressive. Management confirmed that the company gained new hospital customers during the quarter at a record level, which was encouraging. The expansion of both margins in the quarter bodes well.
On the second-quarter earnings call, Masimo’s management confirmed that its Non-healthcare segment’s Hearables category (including headphones and earbuds) was scaled up in the second half of 2022 with the introduction of the Bowers & Wilkins PI7, PX7 and PX8 headphone models. The company has also been witnessing steady growth in its Hearables category on the back of the launch of Denon PerL earbuds with automatic customization of the sound spectrum for personalized listening experience in June. These look promising for the stock.
On the flip side, lower-than-expected earnings and the dismal top-line and bottom-line performances were disappointing. The decline in its Healthcare and Non-healthcare segmental revenues was worrying. Masimo’s lower-than-expected sensor orders during the reported quarter were discouraging.
Zacks Rank & Key Picks
Masimo currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are DexCom, Inc. (DXCM - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
DexCom, carrying a Zacks Rank of 2 (Buy), reported second-quarter 2023 adjusted EPS of 34 cents, beating the Zacks Consensus Estimate by 54.6%. Revenues of $871.3 million outpaced the consensus mark by 4.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DexCom has a long-term estimated growth rate of 42.9%. DXCM’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 28.8%.
Integer Holdings reported second-quarter 2023 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 15.2%. Revenues of $400 million surpassed the Zacks Consensus Estimate by 8.9%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 12.1%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.4%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 15.7%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.2%.