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Masimo (MASI) Beats on Q2 Earnings, Raises 2018 Guidance

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Masimo Corporation (MASI - Free Report) reported second-quarter 2018 adjusted earnings of 73 cents per share, which beat the Zacks Consensus Estimate by a penny. Earnings surged 32.7% on a year-over-year basis.

Revenues improved 10% year over year to $211.6 million in the quarter and surpassed the Zacks Consensus Estimate of $208 million. Per management, Masimo’s rainbow platform, NomoLine Capnography, SedLine Brain Function Monitoring and O3 Regional Oximetry have seen a strong quarter.

Meanwhile, in the past year, shares of Masimo have gained 4.1% against the industry’s decline of 7%.

The stock carries a Zacks Rank #3 (Hold).

Segmental Analysis

Product Revenues

Product revenues came in at $202 million, up 12.4% from the year-ago quarter and 11.2% at constant currency (cc). Per management, the company shipped 58,700 non-invasive technology boards and monitors in the reported quarter. The upside can be attributed to strong demand in both Masimo’s direct and our OEM (Original Equipment Manufacturers) business.

Royalty and Other Revenues

Revenues in the segment totaled $9.6 million, which declined 23.5% from the prior-year quarter.

Masimo Corporation Price, Consensus and EPS Surprise

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

Margin Analysis

In the quarter under review, gross profit totaled $567.7 million, up 8.6% year over year. Adjusted gross margin was 66.8%, up 70 basis points (bps).

Adjusted operating income in the quarter totaled $207.1 million, up 11.7% from a year ago. Adjusted operating margin was 24.4%, which expanded 90 bps.


Masimo raised its 2018 earnings and revenue guidance.

The company expects revenues of $850 million, up from the previous guidance of $846 million. Notably, this reflects growth of 10.8% at cc. The Zacks Consensus Estimate stands at $843.8 million, below the projected figure.

Product revenues are projected at $822 million, up from the previously projected $818 million. The company has retained the guidance for the Royalty and Other segment.

Adjusted earnings per share are expected at $2.90, up from the earlier estimated figure of $2.88. The Zacks Consensus Estimate for the same is pegged at $2.89, below the guided figure.

Our Take

Masimo exited the second quarter on a solid note, with earnings and revenues beating the consensus mark. Strong Product revenues buoy optimism. The company’s non-invasive technology has been facing consistent demand. Masimo’s rainbow platform, NomoLine Capnography, SedLine Brain Function Monitoring and O3 Regional Oximetr also put up a solid show in the quarter.

The launch of UniView and addition of new customers in the quarter are other encouraging factors. A significant expansion in the company’s gross and operating margin is also encouraging.

On the flip side, the Royalties and other revenue segment are facing considerable weakness. Furthermore, the company faces fierce competition from OEM distributors and medical devices bigwigs that might mar its top line over the long haul.

Q2 Earnings of MedTech Majors at a Glance

A few better-ranked stocks in the broader medical space, which reported solid earnings this season, are Thermo Fisher Scientific Inc. (TMO - Free Report) , Intuitive Surgical, Inc (ISRG - Free Report) and Illumina, Inc. (ILMN - Free Report) .

While Intuitive Surgical and Illumina sport Zacks Rank #1 (Strong Buy), Thermo Fisher carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported adjusted earnings of $2.76 per share in the second quarter of 2018, which beat the Zacks Consensus Estimate of $2.48. Adjusted earnings improved 38% year over year.

Illumina reported adjusted earnings of $1.43 per share, beating the Zacks Consensus Estimate of $1.11.

Thermo Fisher reported adjusted earnings per share of $2.75, beating the Zacks Consensus Estimate by 4.6%.

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