Masimo Matches EPS, Profit Dips - Analyst Blog

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Masimo Corporation ( MASI ), a leader in non-invasive monitoring technology for patient care, recorded fourth quarter and fiscal 2011 earnings per share of 23 cents and $1.05, respectively, matching the corresponding Zacks Consensus Estimates but missing the year-ago earnings per share of 29 cents and $1.03, respectively. Reported profit dipped 14.2% year over year to $13.8 million.  

Revenues

Sales for the quarter were up 6% year over year to $112.3 million, beating the Zacks Consensus Estimate of $110 million. For fiscal 2011, revenues moved up 8% to $439 million, surpassing the Zacks Consensus Estimate of $437 million.  

Product revenues increased 12% to $104.7 million in the reported quarter. Masimo's global end-user business (86% of product revenue) increased 17% year over year, but revenues from Original Equipment Manufacturers ("OEM") (14% of product revenue) were down 12%.  Sales of Rainbow products increased 16% year over year to $9.8 million.  

During the quarter, Masimo shipped about 34,400 Masimo SET pulse oximetry and Masimo Rainbow SET pulse co-oximetry units, excluding hand-held sets, declining 18% year over year. The company's worldwide installed base grew 15% year over year to about 979,000 units at the end of the fourth quarter.

Margins

Gross margin fell 65.5% from 70.2% in the year-ago quarter due to higher cost of sales and lower royalty revenues. Operating margin declined to 17.9% from 20.4% a year ago.

Balance Sheet

The company ended the quarter with cash and cash equivalents of $129.9 million, up 47.1% year over year.

Outlook

Masimo expects total sales of about $483 million for 2012. Product sales and royalty are expected to be $455 million and $28 million, respectively. The company projects earnings per share (on a reported basis) of $1.20 for the year.

Masimo is a market leader in the pulse oximetry monitoring equipment industry. The company's prospects are encouraging, given the sizeable global market opportunity, adoption of pulse oximetry in non-critical areas of the hospital and growing barriers to entry due to additional non-invasive parameters.

Shipments have been growing at a steady rate fueled by new contracts. Moreover, the renewal of the royalty agreement with Covidien ( COV ) provides limited impetus albeit at lower rates. However, competition is intense and Masimo partly depends upon its OEM partners for sales as well as royalty.

On June 2011, Masimo announced a non-exclusive, long-term agreement with Philips ( PHG ), under which Philips will utilize Masimo's Rainbow SET know-how. Philips products are expected to integrate Masimo's Rainbow SET technology. We currently have a Neutral recommendation on Masimo. The stock currently retains a Zacks #3 Rank, which translates into a short-term "Hold" recommendation.


 
COVIDIEN PLC ( COV ): Free Stock Analysis Report
 
MASIMO CORP ( MASI ): Free Stock Analysis Report
 
KONINKLIJKE PHL ( PHG ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: COV , MASI , PHG

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