We continue to maintain our ‘Neutral’ rating on Masimo Corp. (MASI) with a target price of $28 based on a P/E of 28.0x our fiscal 2010 EPS estimate of $1. The company’s fourth quarter fiscal 2009 results reflect a mixed trend.
Masimo reported fourth-quarter earnings per share of 23 cents, surpassing the Zacks Consensus Estimate of 22 cents. However, earnings was lower than the year-ago figure of 24 cents. For fiscal 2009, earnings per share was 88 cents, in line with the Zacks Consensus Estimate and higher than 78 cents, a year-ago.
Total revenue in the fourth quarter increased 11% year over year to $92.6 million. Product revenue increased 12% year over year to $80.5 million. Royalty revenue increased 6% year over year to $12.2 million.
Growth in product revenue was primarily due to higher demand for Masimo SET and Masimo Rainbow SET monitors that increased 10% and 23% year over year to $69.1 million and $5.8 million, respectively.
Gross margin increased 60 basis points (bps) year over year to 71.1%. Operating margin declined 110 bps year over year to 23.1%.
Total revenue in fiscal 2009 increased 14% year over year to $349.1 million. Product revenue increased 16% year over year to $300.1 million. Royalty revenue increased 3% year over year to roughly $49.0 million.
Masimo develops, manufactures and markets a family of non-invasive blood monitoring systems that consist of a monitor, circuit board and sensors. The systems are primarily used to monitor blood oxygen saturation levels and protect against hypoxemia and hyperoxemia.
Hypoxemia, low blood-oxygen levels, can cause brain damage and death. Hyperoxemia, high-blood oxygen levels, can permanently damage eyes and cause blindness.
Masimo is a leader in the pulse oximetry monitoring equipment market. The company’s closest competitors are Haemonetics Corp. (HAE) and Becton, Dickinson and Co. (BDX).
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