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Natus Medical (BABY) Q3 Earnings: What's in the Cards?

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Natus Medical, Inc. (BABY - Free Report) is set to report third-quarter 2016 results on Oct 19, before market opens. Last quarter, the company reported earnings of 39 cents, which exceeded the Zacks Consensus Estimate by 3 cents.

We note that, on an average, Natus Medical posted a positive earnings surprise of almost 8.8% over the last four quarters.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

We are highly positive about the innovative pipeline at Natus Medical. Notably, flagship products like Peloton, GND and NicView are expected to drive revenues for the company. Additionally, the acquisition of RetCam earlier this year is expected to increase the market penetration and growth potential for the newborn technology segment at Natus Medical.

However, third-quarter results are expected to be hurt by unsatisfactory performances by the neurology and newborn care units in international markets. The company also expects negative growth in these businesses, thanks to the reduced spending in healthcare and ancillary markets.

NATUS MEDICAL Price and EPS Surprise



In fact, Natus Medical recently updated its third-quarter revenue guidance to the band of $89–$91 million, lower than the previous $97–$98 million. This is mainly because of lackluster demand trends in international markets and issues at the Seattle facility (product-shipment problems). Meanwhile, the company has entered into a definitive agreement with GN Store Nord A/S, which is expected to help the company expand internationally.

Earnings Whispers
Our proven model does not conclusively show that Natus Medical is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below.

Zacks ESP: Natus Medical currently has an Earnings ESP of 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate stand at 36 cents.

Zacks Rank: Natus Medical carries a Zacks Rank #5 (Strong Sell). Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

HMS Holdings Corp. (HMSY - Free Report) , with an Earnings ESP of 7.14% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here. The stock represents a stupendous one-year return of 104.08%.

Ariad Pharmaceuticals Inc. , with an Earnings ESP of +10.00% and a Zacks Rank #1. Additionally, the stock represents a stellar one-year return of 58.5%.

Exelixis Inc. (EXEL - Free Report) , with an Earnings ESP of +15.39% and a Zacks Rank #2. Notably, the company has a stupendous one-year return of almost 95.2%.

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