Yahoo Finance Masimo (MASI) Down 6% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Masimo (MASI). Shares have lost about 6% 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 the most recent earnings report in order to get a better handle on the important drivers.
Masimo Q1 Earnings Surpass Estimates, Margins Down
Masimo delivered adjusted earnings per share of 87 cents in the first quarter of 2023, down 6.5% year over year. However, the figure surpassed the Zacks Consensus Estimate by 4.8%.
The adjustments include acquisition, integration and related costs, and acquired intangible asset amortization expenses, among others.
Our projection of adjusted earnings per share was 83 cents, in line with the Zacks Consensus Estimate.
GAAP earnings per share for the quarter was 39 cents, down by 51.9% from the year-earlier figure.
Revenues in Detail
Masimo registered revenues of $565 million in the first quarter, up 85.7% year over year on a reported basis. The figure surpassed the Zacks Consensus Estimate by 1.4%.
The first-quarter revenue compares to our estimate of $551.4 million.
The year-over-year uptick in revenues was primarily driven by strength in its healthcare business.
Per management, shipments of non-invasive technology boards and instruments, excluding handheld and fingertip pulse oximeters, were 77,300 in the first quarter of 2023.
Segmental Details
Masimo derives its revenues from two business sources — Healthcare and Non-healthcare.
Healthcare revenues in the first quarter were $346.7 million, representing growth of 13.9% on a reported basis and 15.8% at CER.
This compares to our projection of $341.4 million of Healthcare revenues in the first quarter.
Non-healthcare revenues in the first quarter were $218.3 million. This compares to our projection of $210 million of Non-healthcare revenues in the quarter.
Margin Analysis
In the quarter under review, Masimo’s gross profit rose 39.1% to $284.8 million. Gross margin contracted a huge 1688 basis points (bps) to 50.4%.
We had projected 52.4% of gross margin for the first quarter.
Selling, general & administrative expenses jumped 80.3% to $196.3 million. Research and development expenses went up 39.9% year over year to $50.5 million. Total operating expenses of $246.8 million increased 70.2% year over year.
Total operating profit amounted to $38 million, reflecting a 36.3% decline from the prior-year quarter. The operating margin in the first quarter contracted a huge 1290 bps to 6.7%.
We had projected 7.8% of operating margin for the first quarter.
Financial Position
Masimo exited first-quarter 2023 with cash and cash equivalents of $174.1 million compared with $202.9 million at the end of 2022. Long-term debt at the end of first-quarter 2023 was $897.5 million compared with $941.6 million at 2022-end.
Net cash flow from operating activities at the end of first-quarter 2023 was $0.4 million compared with $23.2 million a year ago.
Guidance
Masimo has reiterated its 2023 financial outlook.
For the full year, total revenues are continued to be projected in the range of $2,415 million-$2,460 million. The Zacks Consensus Estimate for the metric is currently pegged at $2.43 billion.
Healthcare revenues are still expected to lie within $1,450 million-$1,465 million (up 8-9% and 8-10% on a reported basis and at CER, respectively), while Non-healthcare revenues for the year are continued to be expected within $965 million-$995 million.
Adjusted earnings per share for 2023 is continued to be projected within $4.70-$4.80. The Zacks Consensus Estimate for the same is pegged at $4.75.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -9.46% due to these changes.
VGM Scores
Currently, Masimo has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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 these revisions 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.
Performance of an Industry Player
Masimo belongs to the Zacks Medical - Instruments industry. Another stock from the same industry, Avanos Medical (AVNS), has gained 9.7% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.
Avanos Medical reported revenues of $191.7 million in the last reported quarter, representing a year-over-year change of -2.9%. EPS of $0.27 for the same period compares with $0.26 a year ago.
Avanos Medical is expected to post earnings of $0.32 per share for the current quarter, representing a year-over-year change of -22%. Over the last 30 days, the Zacks Consensus Estimate has changed -3.1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Avanos Medical. Also, the stock has a VGM Score of D.
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Masimo Corporation (MASI) : Free Stock Analysis Report
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