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Masimo (MASI) Down 3.2% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Masimo (MASI - Free Report) . Shares have lost about 3.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Masimo due for a breakout? 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.

Masimo Q3 Earnings Beat, Demand for SET Products Rises

Masimo reported third-quarter 2018 adjusted earnings of 71 cents per share, which surpassed the Zacks Consensus Estimate by 4.4%. Earnings rose 26.8% on a year-over-year basis.

Revenues improved 8.9% year over year to $210.6 million in the quarter and surpassed the Zacks Consensus Estimate of $206.3 million.

Segmental Analysis

Product Revenues

Product revenues came in at $202.1 million, up 12.4% from the year-ago quarter and 12.8% at constant currency (cc). Per management, the year-over-year upside can be attributed to strong customer demand in both Masimo’s direct and OEM businesses. Worldwide non-invasive technology shipments rose 16% year over year.

Masimo also continues to see strong growth in its rainbow platform.

Royalty and Other Revenues

Revenues at the segment totaled $8.5 million, down 37.7% from the prior-year quarter.

Margin Analysis

In the quarter under review, gross profit totaled $140.8 million, up 13.5% year over year. Gross margin was 66.8%, up 270 basis points (bps).

Adjusted operating income in the quarter totaled $48.6 million, up 13% from a year ago. Adjusted operating margin was 23.1%, which expanded 80 bps.

Research and development expenses totaled $19.4 million, up 27.1% year over year.

SG&A expenses in the quarter were $72.7 million, up 10.7% from the year-ago quarter.

Guidance

For 2018, Masimo expects revenues of $854 million, up from the previously-issued $850 million.

Product revenues are anticipated at $826 million, up from the previously stated figure of $822 million. Per management, this reflects year-over-year growth of approximately 11.9% and 11.3% at cc. Meanwhile, expectations from Royalty and Other revenues remain unchanged at $28 million.

Full-year earnings per share are expected at $2.92, up from the earlier projection of $2.90.

Masimo’s guidance for adjusted gross margin remains unchanged at 24.4%. The same for EBITDA is also pegged at 29.9%.

For 2018, Masimo expects estimated tax rate of 24%.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a flat path over the past two months.

VGM Scores

Currently, Masimo has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Masimo has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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