Dive Brief:
- Masimo said Monday its second-quarter revenue would be below expectations after large orders from hospitals were delayed, prompting the maker of pulse oximeters and other patient monitoring equipment to plan cost cuts in the second half of the year.
- Stifel analyst Rick Wise downgraded the stock to “hold” from “buy” after Masimo released the preliminary quarterly results, citing hospital budget constraints and weaker demand for the company’s consumer products. Masimo’s shares fell 22%, to $114.71, in early trading Tuesday on the Nasdaq market.
- Irvine, Calif.-based Masimo, whose shareholders voted in June to seat two board candidates backed by an activist investor, said it would provide more details on the cost reductions when it releases its complete second-quarter financial results on Aug. 8.
Dive Insight:
Higher labor expenses continue to strain hospital budgets, dampening demand for capital equipment, Masimo said in a statement.
As a result, large orders that were expected in the second quarter have been delayed to the second half of the year, even as the company gained market share through new contracts, Masimo said. U.S. hospitals also admitted fewer inpatients than expected in the second quarter, reducing sales of the company’s single-patient-use sensors.
“While we are disappointed in our revenue results this quarter, our hospital business is strong, as our growth in contracting shows. We do believe sensor utilization and sensor revenue growth rates will return to normal levels,” Masimo Chairman and CEO Joe Kiani said in a statement.
Masimo acquired consumer audio company Sound United for $1 billion last year. A decline in demand previously seen in lower-end consumer audio categories extended into the premium and luxury audio categories and across more geographies, the company said. It added that it is unclear when the premium and luxury business will improve. But demand for both the newly launched Stork baby monitor and Denon brand earbuds with Masimo technology has been strong, the company said.
Masimo now expects its consolidated revenue for the second quarter to range from $453 million to $457 million, with healthcare revenue of $280 million to $282 million and non-healthcare revenue of $173 million to $175 million.
Stifel’s Wise said the company’s projected second-quarter revenue range was 17% below analysts’ consensus estimate.
“While it’s clear Masimo’s long-term Healthcare fundamentals are intact, the Consumer outlook seems more uncertain,” Wise wrote in a research report.
Two candidates backed by Politan Capital Management won seats on Masimo’s board last month after the activist shareholder challenged the company’s strategy, arguing that its $1 billion acquisition of Sound United had led to a $5 billion drop in the device maker’s market value.