On Jan 22, 2015, Zacks Investment Research raised Natus Medical Inc. (BABY) to a Zacks Rank #1 (Strong Buy). The bullish view reflects new product launches, strong revenue growth across all businesses and continuing margin expansion.
Why the Upgrade?
We are impressed with Natus Medical’s product launches and product pipeline strength. The new Vista EMG Ultrasound product and the Hearing Screening Service business (Peloton) are expected to drive revenues in the near term.
Moreover, management is expected to introduce innovative products over the next 18 months in both the newborn care and neurology platforms. We believe that an expanded portfolio will lend Natus Medical a competitive edge over players like Johnson & Johnson (JNJ), Astro-Med, Inc. and NeuroMetrix Inc.
Natus Medical is particularly focusing on enhancing its offerings for the newborn care market. The company recently acquired technology company, Nicview, which pioneered video streaming of babies who are under treatment in the neonatal intensive care unit.
Based on the strong product line, the company has provided an optimistic fourth-quarter 2014 outlook. Natus Medical expects revenues in the range of $92 million to $94 million for the fourth quarter. Meanwhile, non-GAAP earnings are forecasted in the range of 37 cents to 39 cents.
Natus Medical also raised its non-GAAP earnings guidance for full-year 2014, which is now expected in the band of $1.23 to $1.25 (up from $1.20 to $1.23). Revenue guidance was also revised up to a range of $353.8 to $355.8 million (previous guidance was $347.5 to $352.5 million).
Estimate Revisions
The Zacks Consensus Estimate for fiscal 2014 is currently pegged at $1.25 per share, which has remained steady over the last 30 days. Over the same time frame, the 2015 Zacks Consensus Estimate has been revised up by 2 cents to stand at the present $1.42 per share. We believe that the revised estimates reflect top-line growth backed by an enhanced product portfolio.
Other Stocks to Consider
One may also consider favorably-ranked stocks like Inogen (INGN) and IntersectENT (XENT). Both carry the same Zacks Rank as Natus Medical.
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