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Masimo (MASI) Earnings Beat Estimates in Q3, View Raised

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Masimo Corporation (MASI - Free Report) reported third-quarter 2019 adjusted earnings per share (EPS) of 76 cents, which surpassed the Zacks Consensus Estimate of 71 cents. Earnings improved from the year-ago quarter by 26.7%.

The Zacks Rank #3 (Hold) company’s revenues improved 8.8% year over year to $229 million and edged past the Zacks Consensus Estimate of $220.9 million.

Segmental Analysis

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

Masimo Corporation Price, Consensus and EPS Surprise


Masimo Corporation Price, Consensus and EPS Surprise

Masimo Corporation price-consensus-eps-surprise-chart | Masimo Corporation Quote

Product Revenues

Product revenues in the third quarter totaled $228.9 million, up 13.3% from the year-ago quarter and 13.6% at constant currency (cc). Per management, shipments of non-invasive technology boards and monitors increased approximately 2.7% to 60,700 in the quarter.

Royalty and Other Revenues

Revenues at the segment totaled $95,000, significantly down from the year-ago quarter’s $8.5 million.

Margin Analysis

In the quarter under review, gross profit totaled $156.3 million, up 11% year over year. Gross margin was 68.2%, up 140 basis points (bps).

Adjusted operating income in the quarter totaled $51.6 million, up 6.1% from a year ago. Per management, adjusted operating margin dropped 60 bps to 22.5% in the quarter.

Research and development expenses totaled $24.3 million, up 18%.

SG&A expenses in the quarter grossed $80.4 million, up 12.3%.

Guidance Raised

Masimo has further raised its 2019 guidance.

The company expects product revenues of $932 million, compared with the earlier-communicated figure of $925 million. Notably, this calls for reported growth of 12.3% and cc growth of 13.1%. The Zacks Consensus Estimate is pegged at $925.8 million, much below the guided range.

Adjusted EPS is now expected at $3.18 compared with the previously-stated $3.15. The Zacks Consensus Estimate stands at $3.15, below the company’s expectations.

In Conclusion

Masimo exited the third 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 non-invasive technology shipments surged in the quarter. In fact, management foresees increased shipments in the quarters ahead. A raised guidance as well as the recent regulatory approvals and product launches buoys optimism.

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

Earnings of Other MedTech Majors at a Glance

Some better-ranked companies, which posted solid results this earnings season, are Edwards Lifesciences EW, Thermo Fisher Scientific Inc. TMO and ResMed Inc. RMD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Edwards Lifesciences delivered third-quarter 2019 adjusted EPS of $1.41, outpacing the Zacks Consensus Estimate by 15.6%. Net sales of $1.09 billion surpassed the Zacks Consensus Estimate by 5.5%.

Thermo Fisher delivered third-quarter 2019 adjusted EPS of $2.94, which surpassed the Zacks Consensus Estimate by 2.1%. Revenues of $6.27 billion outpaced the Zacks Consensus Estimate by 1.3%.

ResMed reported fiscal first-quarter 2020 adjusted EPS of 93 cents, which beat the Zacks Consensus Estimate of 87 cents by 6.9%. Revenues were $681.1 million, surpassing the Zacks Consensus Estimate by 3.6%.

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