Why Is Masimo (MASI) Down 9.6% Since Last Earnings Report?

It has been about a month since the last earnings report for Masimo (MASI). Shares have lost about 9.6% in that time frame, outperforming 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 catalysts.

Masimo Earnings and Revenues Beat Estimates in Q4

Masimo reported fourth-quarter 2019 adjusted EPS of 91 cents, which surpassed the Zacks Consensus Estimate of 71 cents. Earnings improved 12.3% from the year-ago quarter.

The company’s revenues improved 10.9% year over year to $247.5 million and beat the Zacks Consensus Estimate of $243 million.

Segmental Analysis

Product Revenues

Product revenues in the fourth quarter totaled $247.4 million, up 11.8% from the year-ago quarter and 12% at constant currency (cc). Per management, shipments of non-invasive technology boards and monitors increased 1.8% to 61,400 in the quarter.

Royalty and Other Revenues

Revenues at the segment totaled $0.1 million, significantly down from the year-ago quarter’s $1.7 million.

Margin Analysis

In the quarter under review, gross profit totaled $166.9 million, up 12.5% year over year. Gross margin was 67.4%, up 100 basis points (bps).

Adjusted operating income in the quarter totaled $63.6 million, up 20.9% from a year ago. Adjusted operating margin dropped 190 bps to 25.7% in the quarter.

Research and development expenses totaled $23.4 million, up 12.7%.

SG&A expenses in the quarter grossed $81.9 million, up 11.2%.

Guidance

Masimo expects 2020 product revenues of $1.04 billion, calling for growth of 12.3% and11% at cc.

Adjusted EPS is expected at $3.56.

Adjusted gross margin is projected at 68%, while adjusted operating margin is expected at 24.7%.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

VGM Scores

At this time, Masimo has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Masimo has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.