We maintain our recommendation for
) at Neutral. Earnings per share for the second quarter of $3.75
easily beat the Zacks Consensus Estimate. Profit grew 31.9% year
over year to $154.9 million.
Intuitive Surgical reported revenues of $536.5 million, up 26%
year over year, beating the Zacks Consensus Estimate of $521
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 $223.7 million in
the second quarter, up 30% year over year. Sales increased on the
back of da Vinci surgical procedures as well as new product
introduction. Rise in gynecological procedures, general procedures
in the domestic market and urological procedures in the overseas
market contributed to the growth.
Systems revenues came in at $229.4 million in the second
quarter, up 23% year over year. The growth was driven by higher
sales of da Vinci systems. Intuitive noted that 150 da Vinci
Systems were sold in the quarter, compared with 129 systems in the
year-ago quarter. Service revenues rose 23% year over year to $83.4
million, helped by an increase in the installed base of da Vinci
The company refreshed its guidance for 2012. Growth in total
procedure count continues to be projected between 25% and 27% for
2012. Revenues are now expected to rise 20% to 23% (earlier 19% to
21%). Operating income continues to be forecast in the range of 39%
to 40% of revenues, in line with recent trends.
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, the stock may come
under pressure as investors ponder whether lingering macro economic
uncertainty weakens hospitals' commitment to buy high-cost robotic
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. The stock currently retains
a Zacks #2 Rank, which translates into a short-term Buy
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