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PropThink: CYBX Up After Earnings: New Highs and New Trading Territory

Cyberonics Inc. (NASDAQ:CYBX - News) today released Fiscal 1Q 2013 results that beat analyst expectations, sending shares up 10% in early trading, only to decline slightly into the noon hour to a 5% gain from yesterday's close. The company reiterated revenue guidance for fiscal year 2013 of around $242 million and earnings of $1.49-$1.59 per share. Cyberonics markets the Vagus Nerve Stimulation (VNS) Therapy System, which uses a surgically implanted device to deliver electrical pulses to the vagus nerve in the brain, aiding in the treatment of seizure disorders. The company reported sales growth of 15% and income growth of 35% over the same quarter a year ago, which management says is the sixth consecutive quarter of improvement.

While earnings guidance in the $1.50 range looks good next to Fiscal 2012 earnings of $1.28, last year's numbers included a large deferred tax expense ($22MM) that reduced net income for Cyberonics, and would have reflected earnings closer to 2013 guidance. At $47.75, CYBX trades at a 31x P/E multiple of the mid-range of forward earnings guidance - high for a medtech company approaching mid-cap status - and is approaching overbought territory, as evidenced by the pullback after today's opening gap up. Watch for slight declines this week as CYBX experiences new territory and investors continue to take profits. Should share price fall significantly however, $45 should provide downside support, major fundamental changes aside.

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