Masimo reported their financial results for the second quarter. Thus, the company achieved sales of $137 million, a figure that was in line with analysts’ estimates, and earnings per share of $0.30, which was $0.02 above analysts’ EPS prediction. In what seems to have become a trend for the company, Masimo’s core business delivered strong results, while Rainbow yet again failed to live up to expectations. However, analysts are optimistic as about the company for the first time in a while, especially since there seem to be some palpable factors showing up on the horizon that could push Rainbow forward.
Despite the optimism, some analysts are still uncertain because it’s not the first time Masimo looked as if it might deliver only to miss the mark. Thus, before going all in, analysts feel the company needs to clarify what they plan to do about old pricing problems, hospital reticence in bringing anything new on board before they are forced to do so by the implementation of reforms, the lack of clarity regarding call points, as well as the conflicting clinical results regarding the performance of the product.
Guidance for all of 2014 remains the same with revenues expected to reach $548 million and earnings per share of $1.14. Taking into account H1 results, analysts don’t see many obstacles to the targets other than a bit of uncertainty as to whether Rainbow can actually reach the $50 million mark for 2014.
Generally, analysts feel that this was a strong quarter for Masimo’s core business but they are still reticent to make any sweeping statements despite the increased optimism because of a history of becoming too aggressive too early in the game in regards to Masimo and their results and due to the full evaluation of the situations. Thus, analysts are willing to say the a number of factors, including a validated IP position, a number of very important opportunities, a lack of repayment exposure and a recurring revenue model, support a strong multiple for the company.
Furthermore, the opportunities that are developing for sales Rainbow and the SET placements all have analysts feeling much better about the company in more than two years, which was when the company’s stock was downgraded due to various issues surrounding Rainbow. Despite this, experts feel that further expansion needs to be founded on proof of a more significant commitment from general floor monitoring or hemoglobin products.
So, while experts feel that Masimo’s new technology will eventually be adopted and become standard of care, there is little information regarding how long it will take or what the adoption pace will be, which is something both the company’s management and shareholders are finding beyond frustrating.