Why Cyberonics' Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of implantable-medical-device maker Cyberonics (Nasdaq: CYBX  ) popped as much as 12% today after the company reported better-than-expected second-quarter results and raised its full-year outlook.

So what: For the quarter, Cyberonics reported a 17% jump in revenue to $63 million as profits jumped 36% from the year-ago period to $0.44 per share. Both figures easily surpassed the $59.95 million in sales and $0.39 in EPS that Wall Street had been anticipating. Cyberonics attributed its growth to record U.S. unit sales, as well as double-digit European growth and increased shipments to Japan. Furthermore, the device maker boosted its full-year sales and EPS forecast. Cyberonics now expects net sales in the range of $246 million-$249 million and EPS of $1.56-$1.62 compared to its own previous guidance of $241 million-$244 million in sales and EPS of $1.49-$1.59.

Now what: This was a great quarter for a company that admittedly has some very exciting products targeting the vagal nerve. Despite the upped guidance, I still remain leery about 2013 for a number of reasons. European spending isn't looking good, and the medical device excise tax is set to start taking a 2.3% bite out of Cyberonics' bottom line next year. This may seem like pocket change, but at 32 times forward earnings, that's a hefty price to pay with so many question marks still on the table.

Craving more input? Start by adding Cyberonics to your free and personalized watchlist so you can keep up on the latest news with the company.


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