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Intuitive Surgical (ISRG) Beats on Q4 Earnings & Revenues

Intuitive Surgical Inc.ISRG posted adjusted earnings of $5.30 per share in the fourth quarter of 2016, beating the Zacks Consensus Estimate by four cents, courtesy of stellar revenue growth. Also, the figure improved 2.3% on a year-over-year basis.

Revenues increased 11.9% year over year to $756.9 million, driven by higher procedural volume and growth across all business segments. Revenues were above the Zacks Consensus Estimate of $747 million as well. Recurring revenues totaled $521 million, representing almost 69% of the quarter's top line.

Intuitive Surgical, Inc. Price, Consensus and EPS Surprise

Intuitive Surgical, Inc. Price, Consensus and EPS Surprise | Intuitive Surgical, Inc. Quote

Quarter Highlights

Intuitive Surgical's performance in the quarter was solid with rising customer adoption of procedures and growth in system placements.

Worldwide da Vinci procedure volumes grew approximately 15% year over year, thanks to stellar performances in U.S. general surgery and worldwide urologic procedures. Notably, the company shipped 163 da Vinci surgical systems, up from 158 in the fourth quarter of 2015.

In the U.S., increasing adoption of general surgery procedures, stupendous growth in urology procedures worldwide, and modest growth in the urology and gynecology drove procedural volumes in the quarter. Additionally, growth in the segments of ventral and inguinal hernia repair, colon resection and lung resection was also encouraging.

Revenue Details

Instruments and Accessories revenues grew 18.6% to $386.3 million in the quarter driven by a higher number of procedures and increased sales in stapling and vessel sealing products. Revenues realized per procedure were approximately $1,900 compared with $1,840 in the year-ago quarter.

System sales increased 2.3% to $235.9 million driven by higher revenues from operating lease activities. Intuitive Surgical placed 163 systems in the quarter, up from 158 in the year-ago quarter. Management at Intuitive Surgical noted that 13 systems were placed under operating lease transactions compared with 16 systems in the year-ago quarter. At the end of the quarter, there were 79 systems in the field under operating leases.

Coming to Service, the company registered revenues of $134.7 million, up 12.1% on a year-over-year basis on growth in the installed base of da Vinci systems.

Outside the U.S., the company placed 63 systems compared with 75 in the year-ago quarter and 49 in the first quarter. The company noted that 26 were installed in Europe, 3 in China, 15 in Japan and 19 in other international markets.

Balance Sheet

Intuitive Surgical had cash, cash equivalents and investments of $4.8 billion as of Dec 31, 2016. The company aims to use this cash for capital allocation programs. The company also entered into an accelerated share repurchase program with The Goldman Sachs Group, Inc. GS . Per the agreement, Intuitive Surgical will repurchase $2.0 billion of its common stock from Goldman. Notably, Goldman is expected to make an initial delivery of approximately 2.4 million shares of Intuitive's common stock by approximately Jan 27, 2017.

Our Take

We believe that the growing adoption of Intuitive Surgical's da Vinci system among physicians for general surgery, oncology, urology and gynecology procedures is a key growth catalyst. Moreover, increasing procedural volumes outside the U.S. present significant growth opportunities for the company.

Intuitive Surgical has outperformed the Zacks categorized Medical Instruments sub industry over the period of past one year, helped by its forecast-topping earnings performance and higher procedural volumes. The company's shares have gained 22.16% over this period compared with the industry's gain of around 5.68%.

Zacks Rank & Key Picks

Currently, Intuitive Surgical carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader medical sector are ARIAD Pharmaceuticals, Inc. ARIA and Hologic, Inc. HOLX . Notably both the companies hold a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

ARIAD Pharmaceuticals estimates sales growth at around 28.9% for the current year. Additionally, the company posted a promising one-year return of almost 336.4%.

Hologic has a long-term expected earnings growth rate of approximately 10.32%. Notably, the stock registered an impressive one-year return of 8.07%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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