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Why Is Masimo (MASI) Up 9.2% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for Masimo Corporation (MASI - Free Report) . Shares have added about 9.2% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is MASI due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Recent Earnings

Masimo reported adjusted earnings of 75 cents per share in the first quarter of 2018, outperforming the Zacks Consensus Estimate of 70 cents. The bottom line improved from the year-ago quarter’s figure of 65 cents.

Revenues improved 8.3% to $213 million from $196.6 million in the year-ago quarter and beat the Zacks Consensus Estimate of $206 million.

Segmental Analysis

Product Revenues

Product revenues delivered another strong quarter of double-digit growth. Product revenues were $204.4 million for the quarter, up 12% year over year.

Product revenues also witnessed impressive growth in overseas markets. New products, including NomoLine capnography, rainbow noninvasive blood constituents monitoring, SedLine Brain Function Monitoring and O3 organ oximetry, contributed to the result.

The company’s worldwide direct product revenues (87.5% of total product revenues) increased to $178.9 million in the first quarter of 2018.

OEM sales (12.5% of total product revenues) increased to $25.5 million in the first quarter of 2018.

Notably, in January, Masimo received CE mark for its RD rainbow Lite SET sensors, which enables the use of Oxygen Reserve Index and RPVi. Per management, this is an improved rainbow-based version of PVi, but is less costly than the rainbow sensors.

Royalty and Other Revenues

First-quarter royalties and other revenues fell to $8.6 million from $14.2 million in the prior-year quarter.

Margin Analysis

Total gross profit in the first quarter was $143.6 million, up 8.5% year over year. Gross margin was 67.5% of net revenues, up 20 basis points (bps) year over year.

Product gross margin expanded 70 bps to 66.2% of net revenues.

Guidance

For 2018, revenues are estimated at $846 million, up from the previous projection of $836 million. The Zacks Consensus Estimate for 2018 revenues is pegged at $836.4 million, significantly lower than the guided figure.   

Total 2018 product revenues are estimated at $818, up from previously  issued guidance of $808 million.

Royalty and other revenues are estimated at around $28 million.

Adjusted earnings per share for 2018 are expected at $2.88, up from the previous guidance of $2.80. The Zacks Consensus Estimate for 2018 adjusted earnings at $2.81, significantly lower than the guided estimate.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter.

Masimo Corporation Price and Consensus

 

VGM Scores

At this time, MASI has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for growth and momentum investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Notably, MASI has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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