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Why Is Masimo (MASI) Down 2.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for Masimo (MASI - Free Report) . Shares have lost about 2.9% 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 Q1 Earnings and Revenues Beat, Guidance Solid

Masimo Corporation reported first-quarter 2019 adjusted earnings per share (EPS) of 79 cents, which surpassed the Zacks Consensus Estimate of 75 cents. Earnings improved from the year-ago quarter by 23.4%.
 
The company’s revenues improved 8.8% year over year to $231.7 million and edged past the Zacks Consensus Estimate of $223.6 million.

Segmental Analysis
 
Masimo reports through two segments — Product revenues and Royalty, and Other.
 
Product Revenues
 
Product revenues in the first quarter came in at $230.5 million, up 12.8% from the year-ago quarter and 14.3% at constant currency (cc). Per management, shipments of non-invasive technology boards and monitors were a record 63,700.
 
Royalty and Other Revenues
 

Revenues at the segment totaled $1.1 million, significantly down from the year-ago quarter’s $8.6 million.
 
Margin Analysis

 In the quarter under review, gross profit totaled $151.6 million, up 5.6% year over year. Gross margin was 65.5%, down 200 basis points (bps).
 
Adjusted operating income in the quarter totaled $56 million, up 4.3% from a year ago. Operating margin was 24%, down 100 bps.
 
Research and development expenses totaled $21.4 million, up 9.5%.
 
SG&A expenses in the quarter were $74.2 million, up 5.7%.
 
Guidance Raised
 
For 2019, Masimo expects total revenues of $919 million on a reported basis and $918 million on an adjusted basis, reflecting year-over-year growth of 10.6% at cc. The projected figure is above the previously communicated figure of $912 million. Notably, the guided figure lies above the Zacks Consensus Estimate of $912.9 million.
 
However, management at Masimo doesn’t expect a meaningful contribution from its Royalty and Other revenues unit.
 
EPS is expected to be $3.25 compared with $3.19 stated previously. On an adjusted basis, EPS is anticipated at $3.12, up from the previously stated figure of $3.08. The Zacks Consensus Estimate stands at $3.08, much below the guided figures.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Masimo has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, 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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