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Here's Why You Should Add Masimo Stock to Your Portfolio Now
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Masimo Corporation (MASI - Free Report) is well-poised for growth in the coming quarters, courtesy of its research and development (R&D) efforts. The optimism, led by a solid second-quarter 2024 performance and solid product portfolio, is expected to contribute further. However, concerns regarding overdependence on its Signal Extraction Technology (“SET”) unit and macroeconomic issues persist.
Over the past year, this Zacks Rank #1 (Strong Buy) company’s shares have gained 18.4% compared with the industry’s 7.1% growth. The S&P 500 has witnessed 20.6% growth in the said time frame.
The renowned global provider of non-invasive monitoring systems has a market capitalization of $7.39 billion. The company projects 10.1% growth for 2025 and expects to maintain its strong performance going forward. Masimo’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 14.63%.
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Let’s delve deeper.
Product Portfolio: We are optimistic about Masimo’s healthcare business, which develops, manufactures and markets a variety of non-invasive patient monitoring technologies, hospital automation and connectivity solutions, remote monitoring devices and consumer health products.
Last month, Masimo announced a partnership with Google to develop a new reference platform for original equipment manufacturers (OEMs) building Wear OS by Google smartwatches. MASI also partnered with Qualcomm to help OEMs develop high-performing smartwatches more efficiently by combining Masimo's expertise in advanced biosensing technologies with Qualcomm's Snapdragon wearable platforms. These deals will likely boost the adoption of MASI’s W1 medical watch, which received FDA approval in August.
Masimo announced in September that Saint-Denis Hospital Center, a French hospital, will adopt its SafetyNet cloud-based telemonitoring platform as part of an experimental mobile neonatology unit aimed at facilitating earlier discharge of premature newborns from the ICU.
In July, Masimo introduced Sleep Halo, a powerful new feature, for its Masimo W1 Sport advanced health tracking wearable, intended for scientifically based sleep analysis. Sleep Halo is likely to offer overnight sleep data tracking with an unmatched 70,000+ daily measurements of second-by-second continuous health data. The company introduced White PerL, which is the latest from the Denon PerL product lines, in May.
Consumer Business Sale Holds Potential: Masimo is looking to divest its consumer business and has been searching for an eligible buyer since last year. The deal should help the company to focus on professional healthcare and telehealth/telemonitoring products. In May, MASI and a third party entered into a non-binding term sheet to sell the majority stake in the former’s consumer audio and consumer health businesses for a purchase price of $850-$950 million on a cash and debt-free basis. The company also received unsolicited inbound requests from several entities to acquire its consumer audio business following the expiry of an exclusivity arrangement with respect to the potential joint venture until mid-August. The company is currently evaluating the requests for the optimal value-maximizing structure of the separation.
Research and Product Development: We are upbeat about Masimo’s ongoing R&D efforts, which it believes are essential to its success. The company’s R&D efforts focus on enhancing its technical expertise toward its existing product portfolios and expanding its technological leadership with innovations, among others. Additionally, the company continues to collaborate with Willow on R&D activities related to advancing rainbow technology and other technologies. R&D expenses rose 21.9% year over year to $49 million during the second quarter.
Strong Q2 Results: Masimo’s second-quarter 2024 results buoy optimism. Per management, shipments of non-invasive technology boards and instruments, excluding handheld and fingertip pulse oximeters, totaled 58,600 during the quarter. The company continues to gain market share, along with higher contracts with hospitals. It expects shipments to reach more than 60,000 in the second half of 2024. Management plans three product launches in 2024, namely Freedom, H1 and the next-generation version of its Root Connectivity platform.
Downsides
Declining Non-Healthcare Revenues and Rising Costs: The continued decline in its non-healthcare revenues was disappointing. The non-healthcare business continues to be adversely impacted by the weakening environment for luxury consumer purchases and sluggishness in the housing market. This affects product installations and upgrades. Non-healthcare revenues in the second quarter amounted to $152.4 million, reflecting a decline of 12.5% on a reported basis and 10.8% at CER year over year. Rising operating costs led to the contraction of the operating margin in the quarter, which did not bode well. Masimo continued to navigate through challenging macroeconomic conditions, including inflationary costs and increases in labor costs. This raises our apprehension.
Macroeconomic Concerns: Masimo’s consumer products are generally considered non-essential and discretionary. As such, many of these products can be especially sensitive to general downturns in the economy. Negative macroeconomic conditions such as high inflation, recession and decreasing consumer confidence can adversely impact the demand for these products, affecting Masimo’s business.
MASI has been witnessing a positive estimate revision trend for 2024. In the past 60 days, the Zacks Consensus Estimate for its earnings per share (EPS) has moved north 0.8% to $3.63.
The Zacks Consensus Estimate for the company’s second-quarter revenues is pegged at $495.1 million, implying an 8.7% improvement from the year-ago quarter’s reported number.
Universal Health Service has an estimated long-term growth rate of 19%. UHS’ earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 14.58%.
Universal Health Service’s shares have risen 17.9% compared with the industry's 19.8% growth in the past six months.
Quest Diagnostics has an estimated long-term growth rate of 6.2%. DGX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 3.31%.
Quest Diagnostics’ shares have risen 14.3% in the past six months compared with the industry’s 8% growth.
Baxter’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 3.74%.
BAX’s shares have lost 17.9% in the past six months against the industry’s 5.8% growth.
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Here's Why You Should Add Masimo Stock to Your Portfolio Now
Masimo Corporation (MASI - Free Report) is well-poised for growth in the coming quarters, courtesy of its research and development (R&D) efforts. The optimism, led by a solid second-quarter 2024 performance and solid product portfolio, is expected to contribute further. However, concerns regarding overdependence on its Signal Extraction Technology (“SET”) unit and macroeconomic issues persist.
Over the past year, this Zacks Rank #1 (Strong Buy) company’s shares have gained 18.4% compared with the industry’s 7.1% growth. The S&P 500 has witnessed 20.6% growth in the said time frame.
The renowned global provider of non-invasive monitoring systems has a market capitalization of $7.39 billion. The company projects 10.1% growth for 2025 and expects to maintain its strong performance going forward. Masimo’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 14.63%.
Image Source: Zacks Investment Research
Let’s delve deeper.
Product Portfolio: We are optimistic about Masimo’s healthcare business, which develops, manufactures and markets a variety of non-invasive patient monitoring technologies, hospital automation and connectivity solutions, remote monitoring devices and consumer health products.
Last month, Masimo announced a partnership with Google to develop a new reference platform for original equipment manufacturers (OEMs) building Wear OS by Google smartwatches. MASI also partnered with Qualcomm to help OEMs develop high-performing smartwatches more efficiently by combining Masimo's expertise in advanced biosensing technologies with Qualcomm's Snapdragon wearable platforms. These deals will likely boost the adoption of MASI’s W1 medical watch, which received FDA approval in August.
Masimo announced in September that Saint-Denis Hospital Center, a French hospital, will adopt its SafetyNet cloud-based telemonitoring platform as part of an experimental mobile neonatology unit aimed at facilitating earlier discharge of premature newborns from the ICU.
In July, Masimo introduced Sleep Halo, a powerful new feature, for its Masimo W1 Sport advanced health tracking wearable, intended for scientifically based sleep analysis. Sleep Halo is likely to offer overnight sleep data tracking with an unmatched 70,000+ daily measurements of second-by-second continuous health data. The company introduced White PerL, which is the latest from the Denon PerL product lines, in May.
Consumer Business Sale Holds Potential: Masimo is looking to divest its consumer business and has been searching for an eligible buyer since last year. The deal should help the company to focus on professional healthcare and telehealth/telemonitoring products. In May, MASI and a third party entered into a non-binding term sheet to sell the majority stake in the former’s consumer audio and consumer health businesses for a purchase price of $850-$950 million on a cash and debt-free basis. The company also received unsolicited inbound requests from several entities to acquire its consumer audio business following the expiry of an exclusivity arrangement with respect to the potential joint venture until mid-August. The company is currently evaluating the requests for the optimal value-maximizing structure of the separation.
Research and Product Development: We are upbeat about Masimo’s ongoing R&D efforts, which it believes are essential to its success. The company’s R&D efforts focus on enhancing its technical expertise toward its existing product portfolios and expanding its technological leadership with innovations, among others. Additionally, the company continues to collaborate with Willow on R&D activities related to advancing rainbow technology and other technologies. R&D expenses rose 21.9% year over year to $49 million during the second quarter.
Strong Q2 Results: Masimo’s second-quarter 2024 results buoy optimism. Per management, shipments of non-invasive technology boards and instruments, excluding handheld and fingertip pulse oximeters, totaled 58,600 during the quarter. The company continues to gain market share, along with higher contracts with hospitals. It expects shipments to reach more than 60,000 in the second half of 2024. Management plans three product launches in 2024, namely Freedom, H1 and the next-generation version of its Root Connectivity platform.
Downsides
Declining Non-Healthcare Revenues and Rising Costs: The continued decline in its non-healthcare revenues was disappointing. The non-healthcare business continues to be adversely impacted by the weakening environment for luxury consumer purchases and sluggishness in the housing market. This affects product installations and upgrades. Non-healthcare revenues in the second quarter amounted to $152.4 million, reflecting a decline of 12.5% on a reported basis and 10.8% at CER year over year. Rising operating costs led to the contraction of the operating margin in the quarter, which did not bode well. Masimo continued to navigate through challenging macroeconomic conditions, including inflationary costs and increases in labor costs. This raises our apprehension.
Macroeconomic Concerns: Masimo’s consumer products are generally considered non-essential and discretionary. As such, many of these products can be especially sensitive to general downturns in the economy. Negative macroeconomic conditions such as high inflation, recession and decreasing consumer confidence can adversely impact the demand for these products, affecting Masimo’s business.
Masimo Corporation Price
Masimo Corporation price | Masimo Corporation Quote
Estimate Trend
MASI has been witnessing a positive estimate revision trend for 2024. In the past 60 days, the Zacks Consensus Estimate for its earnings per share (EPS) has moved north 0.8% to $3.63.
The Zacks Consensus Estimate for the company’s second-quarter revenues is pegged at $495.1 million, implying an 8.7% improvement from the year-ago quarter’s reported number.
Other Key Picks
Some other top-ranked stocks in the broader medical space are Universal Health Service (UHS - Free Report) , Quest Diagnostics (DGX - Free Report) and Baxter International (BAX - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Universal Health Service has an estimated long-term growth rate of 19%. UHS’ earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 14.58%.
Universal Health Service’s shares have risen 17.9% compared with the industry's 19.8% growth in the past six months.
Quest Diagnostics has an estimated long-term growth rate of 6.2%. DGX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 3.31%.
Quest Diagnostics’ shares have risen 14.3% in the past six months compared with the industry’s 8% growth.
Baxter’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 3.74%.
BAX’s shares have lost 17.9% in the past six months against the industry’s 5.8% growth.