Why Natus Medical 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 Natus Medical (NASDAQ: BABY  ) , an aptly tickered provider of neurodiagnostic and newborn baby products, surged as much as 10% after reporting its fourth-quarter earnings results.

So what: For the quarter, Natus reported that revenue improved 41% over the previous year to $90.5 million as adjusted EPS advanced to $0.29. While sales came up about $3 million below expectations, EPS surpassed the Street's consensus estimate by $0.03. CEO Jim Hawkins noted that organic revenue grew 2.3% for the year-over-year period, but overall results were hampered by order delays and order weakness in overseas markets. Looking ahead, Natus is forecasting $362 million to $367 million in revenue and EPS of $0.81-$0.84 for fiscal 2013. Current estimates had called for $359 million in revenue and $0.82 in EPS.

Now what: All told, this was a pretty solid quarter for Natus despite the international market weakness. However, I would point out that you shouldn't get too excited about these results because, as Hawkins said, organic growth totaled just 2.3% this quarter. Natus is doing a good job of managing costs to maximize profits, but it'll need market demand abroad to strengthen if it hopes to get much beyond its current valuation.

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