) is slated to report its third quarter results on Tuesday, October
16, 2012. The current Zacks Consensus Estimate for the third
quarter is $3.48, representing an estimated 14.1% annualized
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INTUITIVE SURG (ISRG): Free Stock Analysis
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First Quarter Recap
Intuitive reported second-quarter 2012 earnings per share of $3.75,
beating the Zacks Consensus Estimate of $3.53 and surpassing the
year-ago quarter's earnings of $2.91 per share.
Revenues increased 26% year over year to $536.5 million, beating
the Zacks Consensus Estimate of $521 million.
On a segment basis, revenues from systems were $229.4 million, up
23% year over year. The growth was on account of sales of 150
systems, higher than the 129 systems in the year-ago quarter.
Instrument and accessory revenues were $223.7 million, up 30% year
over year. Service revenues were $83.4 million, up 23% year over
year. The growth was driven by a larger installed base of systems.
Estimate Revision Trend
The overall trend in estimate revisions for the third quarter has
been static (among 14 analysts) over the past 7 and 30 days.
A similar trend was witnessed for 2012 with no analyst (out of 14)
changing his/her estimate over the past week and month.
The current Zacks Consensus Estimate for 2012 is $14.81, reflecting
an estimated 20.2% year over year growth.
Given the lack of estimate revisions, the magnitude of revisions
for the forthcoming quarter has hit a plateau over the last 7 and
The magnitude of revisions for the forthcoming year has hit a
plateau, over the past week and month.
Intuitive Surgical has generated positive surprises in each of the
previous four quarters, and we expect the same trend may continue.
The company produced an average positive earnings surprise of 10.0%
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 will weaken 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 for
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).