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Masimo Delivers Solid Q4 Growth and Boosts Its 2019 Outlook

By Keith Speights - Updated Apr 20, 2019 at 5:55PM

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The maker of noninvasive monitoring technologies controlled its costs effectively in the fourth quarter, resulting in strong earnings growth.

Masimo (MASI 4.00%) showed that it continues to fire on all cylinders when it reported its third-quarter results in November. The company posted solid revenue growth for its noninvasive monitoring technologies with exceptionally strong earnings growth.

The question for Masimo, though, was whether it could keep the momentum going in the final quarter of 2018. Masimo answered that question after the market closed on Tuesday with its fourth-quarter results. Here's what you need to know about Masimo's fourth-quarter update. 

Masimo rainbow SET sensor on a patient in a hospital bed

Image source: Masimo. 

Masimo results: The raw numbers

Metric 

Q4 2018 

Q4 2017 *

Year-Over-Year Change

Sales

$233.1 million $207.9 million

12.1%

Net income (loss) from continuing operations

$46.9 million ($7.7 million)

N/A

Adjusted earnings per share (EPS)

$0.83 $0.54

53.7%

Data source: Masimo. *All Q4 2017 figures adjusted to comply with Masimo's incorporation of new accounting standards in 2018.

What happened with Masimo this quarter?

Masimo's royalty and other revenue continued to slide, dropping from $11.6 million in the prior-year period to $1.7 million in the in the fourth quarter. However, this revenue made up only a small amount of the company's total sales. Masimo's product revenue jumped 12.7% year over year to $221.4 million, with shipments of its noninvasive technology boards and monitors increasing 11.5% to 60,300.

The company's sales growth would have been even stronger were it not for currency fluctuations. Masimo reported that product revenue increased 13% during the fourth quarter on a constant currency basis.

Masimo's bottom line looked much better in the fourth quarter of 2018 than it did in the prior-year period. However, the 2017 fourth-quarter GAAP loss stemmed from a one-time tax hit of $53.1 million.

The more meaningful year-over-year comparison for investors to look at is Masimo's improvement in adjusted earnings per share. The company's adjusted EPS increase resulted in part from higher sales. Masimo's cost of goods sold grew at a slower rate than sales, helping boost earnings. In addition, the company controlled its operating expenses very well, with a year-over-year increase of only 0.5%.

What management had to say

Masimo Chairman and CEO Joe Kiani stated:

2018 was a dynamic year for Masimo as we are seeing strong momentum in our business. Our global organization executed on our strategy to deliver above-market growth and drive operational efficiencies throughout the business. We are extremely happy to report fourth quarter and full year results that exceeded expectations. Due to the strong finish in 2018, we are now increasing our 2019 product revenue guidance to $912 million and our 2019 non-GAAP earnings per diluted share guidance to $3.08.

Check out the latest Masimo earnings call transcript.

Looking forward

As Joe Kiani indicated, Masimo upped its full-year 2019 guidance. The company offered a sneak peek at its fourth-quarter results in January and provided initial 2019 guidance at the time, with projected product revenue of $910 million and adjusted EPS of $3.05. 

Masimo's revised guidance reflects a year-over-year product revenue jump of 9.9%. Its adjusted EPS outlook represents a year-over-year increase of 1.7%. Investors were generally pleased with Masimo's expected improvement on the top and bottom lines.

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