) reported second quarter earnings per share of $3.75, easily
beating the Zacks Consensus Estimate of $3.53 and sailed past the
year-ago earnings per share of $2.91. Profit rose 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
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. Revenues increased on
the back of da Vinci surgical procedures as well as new product
introduction. Rise in gynecological procedures and 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
Service revenues rose 23% year over year to $83.4 million,
helped by an increase in the installed base of da Vinci
Gross margin stood at 72% in the quarter, flat with the year-ago
period. Intuitive reported operating expenses of about $161.1
million in the quarter, up 16.3% year over year. Selling, general
and administrative expenses increased 13.5% to $120.9 million while
research and development expenditure climbed 25.6% to $40.2
Operating income amounted to $225.3 million, or about 42% of
revenues, in the reported quarter compared with $168.1 million, or
39.5% of revenues, in the prior-year quarter.
Intuitive ended the second quarter with cash, cash equivalents
and investments of $2,631.2 million, up 44.4% year over year. It
remains a zero debt company.
For 2012, revenues are forecast to grow in the range of 20% to
23% compared with the earlier guidance of 19% to 21% based on
capital sales trend and new product launch. Operating income
continues to be projected at about 39% to 40% of net sales.
The company continues to expect procedure growth 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).
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