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Masimo (MASI) Q4 Earnings and Revenues Beat, Guidance Solid

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Masimo Corporation (MASI - Free Report) reported fourth-quarter 2018 adjusted earnings of 83 cents per share, which surpassed the Zacks Consensus Estimate by 15.3%. Earnings improved from the year-ago quarter’s loss of 15 cents.

Revenues improved 7.3% year over year to $223.1 million and edged past the Zacks Consensus Estimate of $220 million.

2018 at a Glance

On a full-year basis, the Zacks Rank #2 (Buy) company reported revenues of $858.3 million, which also surpassed the Zacks Consensus Estimate of $855.2 million. Revenues rose 8.6% year over year.

Adjusted earnings per share were $3.45, beating the Zacks Consensus Estimate of $2.93. Earnings skyrocketed 54.7% from 2017.

Masimo reports through two segments — Product revenues and Royalty, and Other.

For 2018, Product revenues grossed $829.9 million (96.7% of net sales) while Royalty and Other revenues totaled $28.4 million (3.3%).

Segmental Analysis

Product Revenues

Product revenues in the fourth quarter came in at $221.4 million, up 12.8% from the year-ago quarter and 13.5% at constant currency (cc). Per management, shipments of noninvasive technology boards and monitors increased 11.5% to 60,300.

Royalty and Other Revenues

Revenues at the segment totaled $1.7 million, significantly down from the year-ago quarter’s $11.6 million.

Margin Analysis

In the quarter under review, gross profit totaled $148.3 million, up 7% year over year. Gross margin was 66.5%, down 20 basis points (bps).

Adjusted operating income in the quarter totaled $54.2 million, up 20.1% from a year ago. Adjusted operating margin was 24.3%, up 260 bps.

Research and development expenses totaled $19.8 million, up 23.1% year over year.

SG&A expenses in the quarter were $74.7 million, down 4% from the year-ago quarter.

Guidance

For 2019, Masimo expects total revenues of $912 million, reflecting year-over-year growth of 10.7% and 9.9% at cc. The projected figure is above the Zacks Consensus Estimate of $908 million.

Notably, the company expects its Product segment to be the sole contributor to revenues in 2019. The segment’s 2019 operating margin is expected at 24%, calling for an improvement of 200 bps from 2018. Additionally, adjusted gross margin for the segment is expected at 66.8%.

Adjusted product earnings per diluted share of $3.08 is expected to increase 16.2% from 2018.

Adjusted EBITDA is projected at 30.4% for 2019.

Management however apprehends $7 million of year-over-year currency headwinds.

In Conclusion

Masimo exited the fourth quarter on a strong note. The company continues to gain from its key Product segment, which witnessed solid growth in the quarter. Notably, the company’s noninvasive technology shipments surged in the quarter. Significant expansion in operating margin and a solid guidance for 2019 buoy optimism in the stock. Management is optimistic about Masimo’s recent initiative for hospital automation. Its Patient Safety Net Systems have also seen robust demand in the quarter. Additionally, Masimo has been selected for the FDA innovation challenge to develop products for preventing and treating opioid use disorder.

On the flip side, Masimo’s Royalty and Other segment saw significant softness in the quarter. In fact, management expects no contribution from the unit in 2019. Furthermore, Masimo expects foreign currency headwinds in 2019. The company faces fierce competition from MedTech bigwigs.

Earnings of Other MedTech Majors at a Glance

Some other top-ranked MedTech stocks that posted solid quarterly results are Varian Medical Systems (VAR - Free Report) , AngioDynamics (ANGO - Free Report) and CONMED Corporation (CNMD - Free Report) .

Varian reported fiscal first-quarter adjusted EPS of $1.06, in line with the Zacks Consensus Estimate. Revenues of $741 million outpaced the consensus mark of $717.9 million. The stock has a Zacks Rank #2.

AngioDynamics’ fiscal second-quarter adjusted EPS of 22 cents exceeded the Zacks Consensus Estimate by a penny. Revenues totaled $91.5 million, which surpassed the consensus estimate by 2.9%. The stock sports a ZacksRank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CONMED delivered fourth-quarter adjusted EPS of 73 cents, in line with the Zacks Consensus Estimate. Revenues of $242.4 million exceeded the Zacks Consensus Estimate of $229.2 million. The stock carries a Zacks Rank of 2.

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