) is scheduled to report its second quarter results on Thursday,
July 19, 2012. The current Zacks Consensus Estimate for the second
quarter is $3.52, representing an estimated 21.02% annualized
First Quarter Recap
Intuitive reported first-quarter 2012 earnings per share of
$3.50, surpassing the Zacks Consensus Estimate of $3.15 and beating
the year-ago quarter's earnings of $2.59 per share.
Revenues increased 28% year over year to $495.2 million, beating
the Zacks Consensus Estimate of $466 million. Recurring revenues
moved up 31% year over year and constituted 58% of sales.
On a segment basis, revenues from systems were $207 million, up
24% year over year. The growth was on account of sales of 140
systems, higher than 120 systems in the year-ago quarter.
Instrument and accessory revenues were $208 million, up 32% year
over year. The increase in revenues reflects 29% growth in total
Service revenues were $81 million, up 27% year over year. The
growth was driven by a larger installed base of systems.
The overall trend in estimate revisions for the second quarter
has been somewhat tilted on the negative side with two analysts out
of 13 lowering their estimates in each of the last 7 and 30 day
periods with no case of upward revision.
With regard to estimates for 2012, there was one case each of
upward and downward revision (out of 14 analysts) over the past
week. A similar mixed pattern was observed over the past month.
The current Zacks Consensus Estimate for 2012 is $14.71,
reflecting an estimated 19.4% year-over-year growth.
Given the relative shortage of estimate revisions, the magnitude
of revisions for the forthcoming quarter dropped by a penny over
the last 7 days. There was a similar decline of 1 cent in forecast,
for the next quarter, over the past 30 days.
The magnitude of revisions for the forthcoming year has hit a
plateau, over the past 7 and 30 days.
Intuitive Surgical has generated positive surprises in each of
the previous four quarters, and we expect the same trend to
continue. The company produced an average positive earnings
surprise of 10.3% over the preceding four quarters, meaning that it
beat the Zacks Consensus Estimate by that measure.
We expect a number of procedures that are currently completed
either in an open surgical manner or with laparoscopy to be
eventually replaced by da Vinci surgery, as robotic surgery becomes
the standard of care in many instances. The company enjoys a
virtual monopoly in robotic surgery with little competition.
Intuitive's recurring revenue stream continues to grow and
provides a shield against cyclicality of revenues arising from the
sale of discretionary capital equipment to hospitals. However, we
believe that until the global economy recovers fully, the stock may
come under pressure as investors ponder whether lingering macro
economic uncertainty weakens hospitals' commitment to buy high-cost
The pace of adoption of robotic surgery may therefore be lumpy
and growth in usage requires acceptance from patients and training
to medical practitioners. Intuitive competes with
) in certain niches.
We prefer to remain on the sidelines partly due to a high
valuation, which factors in the attractive growth prospects of the
company, despite the da Vinci system's leading status as an enabler
of robotic minimally invasive surgery. We are currently Neutral on
the stock, supported by a short-term Zacks #3 Rank (Hold).
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