) reported third quarter earnings per share of $4.46 (excluding
one-time items other than stock-based compensation expense)
surpassing the Zacks Consensus Estimate of $3.48 and sailing past
the year-ago earnings per share of $3.05. Intuitive reported a
profit of $183.3 million, up 49.8% year over year.
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The company reported revenues of $537.8 million, up about 20% year
over year, beating the Zacks Consensus Estimate of $535 million.
Revenues were driven by robust sales of da Vinci Surgical Systems
and increased adoption of da Vinci surgery procedures.
Revenues from instruments and accessories were $218 million in the
third quarter, up 24% year over year. Revenues increased on the
back of new product introduction and higher da Vinci surgical
procedures. Procedure growth was about 22% in the third quarter.
The rise in general and gynecological procedures in the domestic
market was partly offset by reduced growth in Europe and a fall in
prostatectomy procedures in the U.S.
Systems revenues came in at $232 million in the third quarter, up
17% year over year. The growth was driven by higher sales of da
Vinci systems. Intuitive noted that 155 da Vinci Surgical Systems
were sold in the quarter, compared with 133 systems in the year-ago
Service revenues rose 22% year over year to $88 million, aided by
an increase in the installed base of da Vinci systems.
Gross margin stood at 72.5% in the quarter, compared with 72.9% a
year ago. Intuitive reported operating expenses of about $178.7
million in the quarter, up 21.9% year over year. Selling, general
and administrative expenses increased 16% to $129 million while
research and development expenditure climbed 40.4% to $49.7
Operating income amounted to $211.4 million, or about 39.3% of
revenues, in the reported quarter compared with $178.9 million, or
40% of revenues, in the prior-year quarter.
Intuitive ended the third quarter with cash, cash equivalents and
investments of $2,701.1 million, up 43.1% year over year. It
remains a zero debt company.
For 2012, revenues are forecast to grow in the range of 21.5% to
23% compared with the earlier guidance of 20% to 23%. Operating
income is expected at about 40% compared to approximately 39% to
40% of net sales earlier. The company updated its procedure
growth at 24% (earlier in the band of 25% and 27%) for 2012.
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 be robust 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 fully recovers, the stock may
come under pressure as investors ponder whether lingering macro
economic uncertainty weakens hospitals' commitment towards
investment in high-cost robotic systems.
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 high valuation,
which factors in the attractive growth prospects of the company,
despite the da Vinci system's status as a leading enabler of
robotic minimally invasive surgery. We are currently Neutral on the
stock, supported by a short-term Zacks #3 Rank (Hold).