We reiterate our Neutral recommendation on Masimo Corporation (MASI: 24.980.00 0.00%) with a target price of $26. The company reported first quarter 2010 earnings per share of 24 cents, which surpassed the Zacks Consensus Estimate of 23 cents and the year-ago earnings of 22 cents. Revenues came in at $98.8 million in the reported quarter, up 15% year over year. Total sales comprised Product revenues of $85.9 million, up 15.3% year over year, and Royalty of $12.9 million, up 17.3%.Masimo’s pulse oximetry-related and other products enjoy significant market size. Its Signal Extraction Technology (SET) and Rainbow SET line of products are expected to further benefit as hospitals increasingly turn to Masimo SET not only for usage in acute care but also in the general area. The addition of new non-invasive parameters to pulse oximetry is expected to act as a significant long-term barrier to entry, as well as drive substantial growth. In addition, Masimo continues to innovate at an impressive rate with the upcoming Pronto 7 designed to spot check SpHB in about 45 seconds.
Masimo continues to experience a rapid growth in its installed base, up 16% year over year to 757,000 units on April 3, 2010. Growth in driver shipments coupled with a more stable pricing environment in the first quarter of fiscal 2010 provides some comfort regarding the prospects of the company.Our views are, however, tempered as competition is intense in the pulse oximetry market with much larger competitors. In particular, competition is intense for the company’s SET platform. Masimo partly depends on its OEM partners for sales, whose support is dependent on suitable business conditions as well as royalty, which may not be sustainable.
| Analysts' Targets | |
| UBS Securities | $29 |
| Buy | |
| Thursday, May 06, 2010 | |
| Barrington Research | $33 |
| Outperform | |
| Friday, December 04, 2009 | |
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