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Masimo Corporation Upped to Buy - Analyst Blog


On May 8, Zacks Investment Research upgraded Masimo Corporation (NASDAQ: MASI) to a Zacks Rank #2 (Buy) from a Zacks Rank #3 (Hold).

Why the Upgrade?

Masimo has been enjoying rising estimate revisions in the past 30 days with five upward estimate revisions and no downward revision for 2014. The upward estimate revisions led to a 12.1% rise in the Zacks Consensus Estimate to $1.30 per share for the year over the same timeframe.

Moreover, Masimo delivered positive earnings surprises in the last four quarters, with an average beat of 16.5%.

On Apr 30, 2014, Masimo reported first-quarter adjusted earnings of 39 cents per share, which reflected a year-over-year growth of 39.3% and comfortably beat the Zacks Consensus Estimate of 29 cents. Revenues during the first quarter (including royalties) were up 2.8% to $139.8 million but lagged the Zacks Consensus Estimate of $144.0 million.

Revenue growth was partially driven by modest improvements in product revenues, royalties and OEM sales. The company witnessed strong Masimo rainbow products revenues, which spiked 23% to $12.9 million during the quarter.

Masimo ended the quarter with a strong financial position as cash and cash equivalents were up 23.1% and capital lease obligations were down 23.2% from Dec 28, 2013.

For 2014, Masimo expects reported earnings in the range of $1.24 to $1.33. The current Zacks Consensus Estimate of $1.30 lies within the guided range.

Masimo expects revenues of $588 to $598 million for 2014, which includes Product revenues of $560 to $570 million and Royalty revenues of $28 million. Product revenue guidance includes rainbow revenues of $60 million. The current Zacks Consensus Estimate of $591 million lies within the projected range.

Masimo entered 2014 with a 10% increase in its global installed base. A robust pipeline of multiple new products coupled with continuing market share gains provides a potential upside for the company going forward.

Other Stocks to Consider

Some other medical instrument stocks include RTI Surgical Inc. (NASDAQ: RTIX), Accuray Incorporated (NASDAQ: ARAY) and Globus Medical, Inc. (NYSE: GMED). While RTI Surgical sports a Zacks Rank #1 (Strong Buy), Accuray and Globus Medical carry a Zacks Rank #2 (Buy).

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