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How Masimo Blew Past Wall Street Estimates in Q4

By Keith Speights - Feb 20, 2020 at 7:00AM

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Demand continued to be strong for the medical technology company's pulse oximetry devices.

Masimo (MASI 1.11%) turned in a fantastic performance in 2019, with its shares soaring 47%. The stock is also doing quite well so far in 2020, with shares up 15%.

This solid momentum shouldn't be derailed by Masimo's latest quarterly results. The medical technology company announced its 2019 fourth-quarter and full-year numbers after the market closed on Wednesday. Here are the highlights from Masimo's Q4 update.

A patient in a hospital bed next to Masimo's RD rainbow set non-invasive monitoring system

Image source: Masimo.

By the numbers

Masimo reported revenue in the fourth quarter of $247.5 million. This reflected a 23% increase from the prior-year period revenue total of $223.1 million. It also topped the consensus Wall Street Q4 revenue estimate of $243.79 million.

The company announced Q4 net income of $52.9 million, or $0.92 per share, based on generally accepted accounting principles (GAAP). This was a solid improvement from the GAAP net income of $46.9 million, or $0.83 per share, posted in the prior-year period.

Masimo's adjusted non-GAAP earnings in the fourth quarter totaled $52.1 million, or $0.91 per share. In the same quarter of 2018, the company posted adjusted earnings of $45.5 million, or $0.81 per share. The average analysts' Q4 estimate projected Q4 adjusted earnings of $0.87 per share.

Behind the numbers

Masimo makes most of its money from sales of its noninvasive technology boards and monitors, especially its pulse oximetry technology. The company reported product revenue of $247.4 million in the fourth quarter, up nearly 12% year over year. Shipments of its noninvasive boards and monitors in Q4 rose 1.8% to 61,400 from 60,300 in the prior-year period.

The company also still generates a small amount of revenue from royalties and other sources. This revenue totaled $76,000 in Q4, down from $1.72 million in the fourth quarter of 2018.

Masimo's bottom line was boosted by its revenue growth. It also helped that the cost of goods sold increased at a slower rate than sales did, resulting in an improved gross margin. However, the company's operating expense grew at a slightly faster rate than sales increased, partially offsetting the benefit from a higher gross margin. In addition, Masimo recorded a higher provision for income taxes in Q4 than it did in the prior-year period.

Looking ahead

Masimo projects product revenue of $1.035 billion for full-year 2020. This revenue guidance includes around $4 million from the anticipated negative impact of currency fluctuations. The company also expects GAAP earnings per share (EPS) for full-year 2020 will come in at $3.64, with adjusted EPS of $3.56. 

The company announced in January that it signed an agreement with NantHealth to acquire its Connected Care assets. This acquisition will include an upfront cash payment of $47.25 million, providing "medical device interoperability to hospitals and health systems." The deal is expected to close during the first quarter of this year. 

There are some uncertainties for healthcare stocks in 2020, notably including the potential impact from the U.S. presidential election. Because Masimo is also a technology stock with operations in China, it could be affected by the Covid-19 coronavirus outbreak as well. However, Masimo's overall prospects appear to be strong.

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Stocks Mentioned

Masimo Corporation Stock Quote
Masimo Corporation
$139.34 (1.11%) $1.53
NantHealth, Inc. Stock Quote
NantHealth, Inc.
$0.54 (1.57%) $0.01

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