Why Masimo (MASI) Could Beat Earnings Estimates Again

Have you been looking for a stock that might be well-positioned to continue its earnings streak in its upcoming report? Consider Masimo (MASI), which belongs to the Zacks Medical – Instruments industry.

The medical technology company has had a good streak of beating earnings estimates, especially when looking at the last two reports. The average surprise over the last two quarters was 2.90%.

For the last reported quarter, Masimo showed earnings of $0.71 per share, versus the Zacks consensus estimate of $0.68 per share, representing a surprise of 4.41%. In the previous quarter, the company was expected to post earnings of $0.72 per share and actually produced earnings of $0.73 per share, representing a surprise of 1.39%.

Price and EPS are surprising

Given this earnings history, Masimo’s latest estimates are moving higher. In fact, the Zacks Earnings ESP (Expected Surprise Prediction) for the company is positive, which is a great sign of an earnings beat, especially when you combine this metric with its strong Zacks Rank.

Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better deliver a positive surprise almost 70% of the time. In other words, if you have 10 stocks with this combination, the number of stocks that beat consensus estimates could be as many as seven.

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a revision of the Zacks Consensus definition that is related to revision. The idea is that analysts revising their estimates just before an earnings release have the latest information, which could potentially be more accurate than what they and other contributors to the consensus had previously predicted.

Masimo currently has an Earnings ESP of +1.04%, suggesting that analysts have become bullish on its near-term earnings potential. When we combine this positive Earnings ESP with the stock’s Zacks Rank #3 (Hold), it shows that another beat is likely just around the corner. The company’s next earnings report is expected to be released on February 26, 2019.

When the Earnings ESP is negative, investors should remember that this will reduce the predictive power of the indicator. However, a negative value is not an indicator of a lack of earnings for the stock.

Many companies end up beating consensus EPS estimates, although that’s not the only reason their stocks appreciate. In addition, some stocks can remain stable even if they end up missing consensus estimates.

For this reason, it is very important to check a company’s Earnings ESP before its quarterly release to increase your chances of success. Make sure you use our Earnings ESP Filter to discover the best stocks to buy or sell before they are released.

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