After National Instruments' (Nasdaq: NATI) reported a record first quarter with EPS growth of 67% year-over-year, its stock fell almost 13% intraday and closed down 6%.

Why? Well, the company did miss the $0.26 consensus EPS estimate by a penny. Revenue of $238 million, which grew 24% year-over-year, was $1 million shy of the consensus forecast.

It's the macroeconomy, stupid
But it was likely the outlook that sent the stock reeling. Management stated that macroeconomic events have made it "incrementally more cautious regarding Q2." In addition to the tragedy in Japan, National Instruments said higher oil prices and U.S. federal budget issues have affected global business conditions.

Management expects second quarter revenue growth of 14% to 20% year-over-year, a meaningful slowdown from the first quarter's 24%. It expects EPS growth of 10% to 48%; the wide range and slowing pace both signal caution.

When asked about the guidance, management stated they were concerned about "ripple effects that we're going to see in May, June, perhaps July from the events that we saw in March and April."

Is National management overreacting? I doubt it. They follow the PMI, or Purchasing Managers Index. The JPMorgan Global Manufacturing PMI fell to a three-month low of 55.8 in March, from a near-record high of 57.4 in February. That's still a positive number, but one that signals the pace of manufacturing growth is slowing.

All the right moves
NATI itself continues to make all the right investments for long-term growth, including expanding its product portfolio and sales force. That's helped it outperform other makers of scientific and technical instruments, as shown in the following table.


5-Year Revenue CAGR

5-Year Net Income CAGR

National Instruments



Agilent Technologies (NYSE: A)



LeCroy (Nasdaq: LCRY)



Source: Capital IQ. Agilent had a $901 million affiliate gain in 2006 which is factored into its starting net income.

What's more, NATI's products make its customers more competitive. That's a much easier sell than nice-to-have products. For example, TriQuint Semiconductor (Nasdaq: TQNT) used National Instrument's equipment to reduce its capital equipment costs, power consumption, and physical space requirements. Plus, TriQuint's test time was shortened from two weeks to one day... and time is money.

Foolish takeaway
If the ripple effects NATI management is concerned about are minor, this could be an opportunity to buy a well-managed growth company on a dip. If the ripples turn out to be waves, there is still a lot to like about NATI as a long-term holding.

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