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Intuitive Surgical (ISRG) Beats on Q1 Earnings & Revenues

Zacks

Intuitive Surgical Inc. ISRG posted adjusted earnings of $4.67 per share in the first quarter of 2017, crushing the Zacks Consensus Estimate of $3.97 on stellar revenue growth. Also, the figure improved 27.2% on a year-over-year basis. Interestingly, over the past four trailing quarters, the company beat estimates at an average of 11.55%.

Revenues increased 13% year over year to $674 million, driven by growth in recurring instrument, accessory and service, and systems revenue. Revenues also beat the Zacks Consensus Estimate of $661 million.

The stock currently holds a Zacks Rank #2 (Buy).

Intuitive Surgical, Inc. Price, Consensus and EPS Surprise


Intuitive Surgical, Inc. Price, Consensus and EPS Surprise | Intuitive Surgical, Inc. Quote

Business Highlights

Intuitive Surgical posted solid numbers in the quarter, courtesy of rising customer adoption of procedures and growth in system placements.

Worldwide da Vinci procedure volumes grew approximately 18% year over year, thanks to stellar performances in the U.S. general surgery and worldwide urologic procedures. Notably, the company shipped 133 da Vinci surgical systems, up from 110 in the first quarter of 2016.

Revenue Details

Instruments and Accessories: Revenues at the segment grew 18.2% to $380.8 million in the quarter, driven by strong procedure growth and increased sales of stapling and vessel sealing products. Revenues realized per procedure were approximately $1,840 compared with $1,830 in the year-ago quarter.

System: Sales increased 3.6% to $153.2 million buoyed by higher revenues from operating lease activities. Intuitive Surgical placed 133 system orders in the quarter, up from 110 in the year-ago quarter. Management at Intuitive Surgical noted that 21 systems were placed under operating lease transactions, compared with 19 systems in the year-ago quarter. At the end of the quarter, there were 95 systems in the field under operating leases.

Service:The Company registered revenues of $140.2 million, up 12.6% on a year-over-year basis on growth in the installed base of da Vinci systems.

International Growth

Per management, the company posted revenues of $183 million outside the U.S., up 12% from the first quarter of 2016.

The company placed 56 system orders, compared with 36 in the year-ago quarter and 63 in the fourth quarter. These included 21 orders in Europe, seven in Korea, six in India, six in Japan and two in China.

Financial Update

Intuitive Surgical ended the first quarter of 2017 with $3.1 billion in cash, cash equivalents, and investments, down by $1.7 billion on a year-over-year basis.

Outlook

Intuitive Surgical plans to launch an upgrade to the company’s flagship Vinci Xi technology – da Vinci X. In this regard, management confirmed the submission of documents for the CE Mark approval for Vinci X. Furthermore, the company expects availability of this device in Europe by the second quarter.

For the second quarter, the company expects procedure growth rate to slow down a bit outside the U.S.

Intuitive Surgical anticipates full-year 2017 procedure growth within 12% to 14%, up from the previously provided range of 9% to 12%.

Full-year 2017 gross profit margin is expected in the upper end of the previously provided range of 69% to 71% of net revenue.

Our Take

We believe that the growing adoption of Intuitive Surgical’s da Vinci system among physicians for general surgery, oncology, urology and gynecology procedures is a key growth catalyst. Moreover, increasing procedural volumes outside the U.S. present significant growth opportunities for the company.

Intuitive Surgical outperformed the Zacks categorized Medical Instruments sub industry over the last one year, driven by its earnings outperformance and higher procedural volumes. The company’s shares gained 21.4% over this period compared with the industry’s gain of around 1.2%.

Other Key Picks

Other top-ranked stocks in the broader medical sector include Inogen Inc. INGN, Hologic, Inc. HOLX and Sunshine Heart Inc SSH. Notably, all the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Inogen has a long-term expected earnings growth rate of 17.50%. The stock represents an impressive one-year return of 55.8%.

Hologic has a long-term expected earnings growth rate of 11.33%. The stock has a stellar one-year return of roughly 15.3%.

Sunshine Heart posted a positive earnings surprise of 58.24% in the last reported quarter. The stock has a stellar EPS growth record (last 3–5 years of actual earnings) of almost 22%.

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