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Masimo (MASI) Q1 Earnings, Revenues Beat; View Raised - Analyst Blog

Masimo CorpMASI reported adjusted earnings of 41 cents per share in the first quarter of 2015 (ended Apr 4, 2015), topping the Zacks Consensus estimate by a nickel. On a year-over-year basis, adjusted earnings per share (EPS) increased 32.3% led by strong SET revenue growth, higher gross margin and operating expense control.

Masimo Corporation - Earnings Surprise | FindTheCompany

Following the release of Masimo's first-quarter results, shares of the company climbed roughly 4.45% or $1.51 in after-hours trading.

Quarter Details

Total revenues increased 13.6% year over year to $158.8 million, which easily surpassed the Zacks Consensus Estimate of $152 million.

Product revenues increased 14.6% year over year to $151.6 million, while revenues from royalty were down 5.3% to $7.2 million. Product revenues were negatively impacted by approximately $4.2 million in the quarter due to volatile foreign currency.

Worldwide direct product revenues (85% of product revenues) increased 13%, while OEM sales jumped 6%. Masimo rainbow revenues declined 5.4% to $12.2 million in the quarter.

During the first quarter, SET pulse oximetry and rainbow Pulse CO-Oximetry unit shipments (excluding handheld units) totaled 44,000. Per Masimo, worldwide installed base as of Apr 4, 2015 was 1,340,000 units, up 9% from 1,231,000 units as of Mar 29, 2014.

Gross margin expanded 100 basis points (bps) year over year to 67.1%, primarily owing to the impact of the company's ongoing value engineering programs.

Total operating expenses, as a percentage of revenues, declined 130 bps year over year to 48.7%, due to lower expenses outside the U.S., partially offset by higher legal, employee and employee-related costs, as well as marketing-related expenses.

Operating margin expanded 230 bps to 18.5% driven by lower operating expenses and a higher gross margin base.

Financial Position

As of Apr 4, 2015, Masimo had cash and cash equivalents of $135.7 million, slightly higher than $134.5 million as of Jan 3, 2015. Long-term debt, as of Apr 4, 2015, stood at $125.1 million, almost in-line with the quarter-ago level.

Guidance

Masimo updated its EPS and revenue guidance for 2015, as a result of the strong first-quarter performance.

The company now projects total revenues of $608 million for 2015, up from the earlier expectation of $605 million, while product revenues are expected at $580 million, up from $577 million estimated earlier.

Masimo expects GAAP EPS of approximately $1.33, higher than the earlier projection of $1.30. The company also provided its initial 2015 adjusted EPS projection of $1.48.

Additionally, Masimo expects to generate approximately $70 million in cash this year, excluding the impact of capital spending related to its new headquarters building. Also, fiscal 2015 EBITDA is expected to come in at approximately $115-$120 million.

Our Take

We are impressed with Masimo's better-than-expected first quarter of 2015, as well as higher guidance provided by management. The significant improvement in revenue generation, coupled with the reduction in operating expenses, offers encouragement.

We believe that new products launched over the past 12 months are beginning to make visible contributions to product revenues, driven by greater adoption and utilization. Moreover, Masimo's SET pulse oximetry business represents considerable growth opportunities, particularly in Canada, Europe, India, Japan and the Middle East.

However, we are concerned about the unfavorable foreign exchange rate that will adversely affect both the top and the bottom line in the remainder of 2015 and beyond.

Stocks to Consider

Currently, Masimo has a Zacks Rank #3 (Hold).

Better-ranked stocks in the medical instruments industry include IRadimed Corp IRMD , RTI Surgical RTIX and Inogen INGN . While IRadimed and RTI Surgical sport a Zacks Rank #1 (Strong Buy), Inogen carries a Zacks Rank #2 (Buy).

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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 Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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