Reasons to Add Masimo Stock to Your Portfolio Now

Masimo Corporation MASI is well-poised for growth in the coming quarters, courtesy of its research and development (R&D) efforts. The optimism, led by a solid first-quarter 2024 performance and its 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 #2 (Buy) company's shares have lost 7.1% against the industry's 6% growth. The S&P 500 has witnessed 17.6% growth in the said time frame.

The renowned global provider of non-invasive monitoring systems has a market capitalization of $5.84 billion. The company projects 9.3% growth for 2025 and expects to maintain its strong performance going forward. Masimo's earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed once, the average surprise being 4.7%.

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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 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. In February, Masimo received the FDA's clearance for MightySat Medical, making it the first and only FDA-cleared medical fingertip pulse oximeter available over-the-counter to consumers without a prescription.

Research and Product Development: We are upbeat about Masimo's ongoing R&D efforts, which it believes are essential to its success. Its R&D efforts focus on continuing to enhance 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.

Strong Q1 Results: Masimo's first-quarter 2024 results buoy optimism. Per management, shipments of non-invasive technology boards and instruments, excluding handheld and fingertip pulse oximeters, totaled 50,400 during the quarter. The company continues to gain market share, along with higher contracts with hospitals. Moreover, it expects shipments to cross 55,000 from the second quarter and 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

Consumer Business Spin-off: Masimo is currently in discussion to spin off its Consumer business with an undisclosed third party. The company entered into a non-binding term sheet agreement in May to sell the majority stake in its consumer audio and consumer health businesses. The third party offered to acquire a stake in MASI's consumer business for a purchase price of $850-$950 million, on a cash and debt-free basis, following the completion of six weeks of due diligence.

MASI added the majority of its Consumer business with the acquisition of Sound United in 2022 for more than $1 billion. The current offer price for the business seems to be lower than the acquisition price, implying a potential loss for its shareholders.

Rift With Politan: Masimo has been facing challenges from activist investor, Politan, since last year. Politan acquired a stake in Masimo last year and added two members to the latter's board. Politan has been trying to gain control of the board since then. Currently, the activist investor has nominated members against MASI's CEO and founder, Joe Kiani, in a proxy vote for electing new board members. A potential loss of control over the board for Kiani may lead to uncertain times. Although Politan is claiming that it will help boost shareholders' value after gaining the board's control, it may take some time to get reflected in the company's share price.

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 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 that have announced quarterly results are Haemonetics, Intuitive Surgical and Boston Scientific Corporation.

Haemonetics, currently carrying a Zacks Rank #2, reported fourth-quarter fiscal 2024 adjusted EPS of 90 cents, which beat the Zacks Consensus Estimate by 2.3%.

Haemonetics' shares have risen 7.1% year to date compared with the industry's 3.2% growth. It has a long-term growth rate of 12%. HAE's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 13.24%.

Intuitive Surgical, carrying a Zacks Rank #2 at present, reported first-quarter 2024 adjusted EPS of $1.50, which beat the Zacks Consensus Estimate by 7.1%. The stock has risen 29.8% year to date compared with the industry's 6.1% growth.

ISRG has a long-term growth rate of 16.1%. Its earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.78%.

Boston Scientific reported first-quarter 2024 adjusted EPS of 56 cents, which beat the Zacks Consensus Estimate by 9.8%. The company currently carries a Zacks Rank #2. Boston Scientific's shares have risen 35.2% year to date compared with the industry's 3.2% growth.

BSX has a long-term growth rate of 12.5%. Its earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.49%.

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