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Natus Medical Expands Share Repurchase Program by $20M

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Natus Medical Inc. ( BABY ) recently announced an expansion of its share repurchase program, which authorizes it to buy back additional shares worth $20 million by Jun 1, 2017. However, shares did not show much positive movement in response to the news. Share price increased only 0.6% to close at $34.16 on Jun 3, 2016.

Per management at Natus Medical, the repurchase will be funded by using cash on hand, cash generated from operations, existing credit facilities or other financing options. As of Mar 31, 2016, the company had cash and cash equivalents of approximately $81 million and an existing line of credit of $25 million.

Natus Medical expects to generate cash flow from operations of almost $70 million, while free cash flow is projected at around $65 million for full-year 2016. The improving liquidity will help the company to easily fund the acquisition of the additional shares. This will definitely boost the bottom line in the upcoming quarters.

Meanwhile, Natus Medical reported earnings of 34 cents per share in first-quarter 2016 which beat the Zacks Consensus Estimate by 4 cents and increased 9.7% from the year-ago quarter. The company repurchased $9.1 million of its stock during the quarter.

Natus Medical expects earnings to be in the range of 35−36 cents on the back of revenues of $92−$93 million ($91.9 million reported in the year-ago quarter) for the second quarter of 2016.

For full-year 2016, earnings are projected to be in the range of $1.61−$1.65 per share with revenues in the band of $378−$382 million (up 1.1% at mid-point).

Natus Medical believes its innovative product pipeline and increasing demand for Peloton (newborn hearing screening tests), NicView (provides streaming video for families and babies in the neonatal intensive care unit (NICU) 24/7), and Global Neurodiagnostic (GND) services will help it to achieve the targets for full-year 2016.

Natus Medical expects to receive its first NicView order from outside the U.S. in the second quarter. The NicView service is already used by 83 hospitals in the U.S.

Notably, the acquisition of NeuroQuest LLC (in March this year) allowed Natus Medical to expand its GND services into seven new states in the U.S. The company further expects to expand GND services in the U.S. throughout 2016.

We believe that the expansion of these services will drive Natus Medical's top-line growth, going forward. The company still aims at achieving adjusted operating margin of 20% for full-year 2016, which is difficult considering the first-quarter decline (16.3% versus 16.9% in the year-ago quarter). Moreover, the Venezuelan crisis remains a concern.

Zacks Rank & Stocks to Consider

Currently, Natus Medical carries a Zacks Rank #4 (Sell).

Better-ranked stocks in the medical sector include Masimo Corp MASI , Cryolife CRY and Exactech EXAC . While Masimo and Cryolife sport a Zacks Rank #1 (Strong Buy), Exactech has a Zacks Rank #2 (Buy).

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MASIMO CORP (MASI): Free Stock Analysis Report

NATUS MEDICAL (BABY): Free Stock Analysis Report

EXACTECH INC (EXAC): Free Stock Analysis Report

CRYOLIFE INC (CRY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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