Masimo's Mixed 4Q, Profit Up - Analyst Blog
February 15 2013 - 3:40AM
Zacks
Masimo Corporation
(MASI), a leader in non-invasive monitoring technology for patient
care, recorded fourth quarter and 2012 earnings per share of 26
cents and $1.04, respectively, missing the corresponding Zacks
Consensus Estimates of 28 cents and $1.09 but beating the year-ago
earnings per share of 23 cents and $1.05, respectively. Reported
profit rose 8.6% year over year to $15 million in the fourth
quarter.
Revenue
Analysis
Revenues in the quarter increased
18% year over year to $132.2 million, beating the Zacks Consensus
Estimate of $128 million. For 2012, revenues moved up 12% to $493.2
million, surpassing the Zacks Consensus Estimate of $490
million.
Product revenues were up 20% to
$125.3 million in the reported quarter. Masimo’s global end-user
business (85% of product revenue) improved 18% year over year,
while revenues from Original Equipment Manufacturer (OEM) (15% of
product revenue) were up 28%. Sales of Rainbow products increased
13% year over year to $11.1 million.
During the quarter, Masimo shipped
about 42,700 Masimo SET pulse oximetry and Masimo Rainbow SET pulse
co-oximetry units, excluding hand-held sets, up 24% year-over-year.
The company’s worldwide installed base increased 11% year over year
to about 1,088,000 units at the end of the fourth quarter.
Margins
Gross margin stood at 66% in the
quarter, higher than 65.5% a year ago. Operating margin declined to
16.9% from 17.9% a year ago.
Balance Sheet
Masimo ended the quarter with cash
and cash equivalents of $71.6 million, down 44.9% year over
year.
Guidance
Masimo issued its guidance for
2013. The company forecasts total sales of about $548 million
comprising of product sales of $520 million and $28 million of
royalty. Masimo expects reported earnings per share of $1.14 for
2013.
Our Take
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.
While Masimo’s patented SET
offering remains its mainstay, the rainbow measurements represent
another growth driver. However, the company’s reliance on
third-party providers like OEMs for a part of its business and
customer concentration raises concern. Additionally, we remain
concerned about Masimo’s reliance on group purchasing organizations
for the sale of its pulse oximetry products to hospitals in the
domestic market.
We also note
Covidien’s (COV) effort to expand its oximetry and
monitoring products portfolio. In late 2012, the company won U.S.
Food and Drug Administration (FDA) 510(k) approval as well as
European Economic Area (EEA) CE Mark clearance for its Nellcor
Bedside Respiratory Patient Monitoring system.
The stock carries a Zacks Rank #4
(Sell). We are more positive about Given Imaging
Ltd. (GIVN) and Novadaq Technologies Inc.
(NVDQ) both of which are Zacks Rank #1 (Strong Buy) and are
expected to do well.
COVIDIEN PLC (COV): Free Stock Analysis Report
GIVEN IMAGING (GIVN): Free Stock Analysis Report
MASIMO CORP (MASI): Free Stock Analysis Report
NOVADAQ TEC INC (NVDQ): Free Stock Analysis Report
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