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Intuitive Surgical (ISRG) Down 0.7% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Intuitive Surgical (ISRG). Shares have lost about 0.7% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Intuitive Surgical due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Intuitive Surgical Q3 Earnings Beat, da Vinci Drives Growth

Intuitive Surgical reported adjusted earnings of $2.83 per share in the third quarter of 2018, which beat the Zacks Consensus Estimate of $2.65. Adjusted earnings improved 1.8% year over year.

Revenues totaled $920.9 million, up 14% from the prior-year quarter. The figure also surpassed the Zacks Consensus Estimate of $918.6 million. The upside was backed by higher worldwide da Vinci procedures led by growth in U.S. general surgery procedures and global urologic procedures.

Segment Details

Instruments & Accessories

Revenues in the segment came in at $486.3 million, which reflects year-over-year increase of 21.2%. The uptick in instrument accessory revenues was primarily driven by procedure growth and favorable customer buying pattern.

Systems

In the reported quarter, System revenues increased 4.8% year over year to $274.6 million. Notably, 231 da Vinci Surgical systems were shipped by the company compared with 169 in the third quarter of 2017.

In the quarter under review, shipments included 58 systems under operating lease arrangements compared with 20 in the year-ago quarter.

Services

Services revenues came in at $160, up 2.7% from the year-ago quarter.

International Sales Up

Outside the United States, revenues totaled $244 million, up 15% on a year-over-year basis. The upside can be attributed to an increase in instruments and accessories revenues of $30 million.

Outside of the United States, Intuitive Surgical placed 75 systems in the reported quarter compared with 62 in the third quarter of 2017. This included 30 into Europe and 30 into Japan. X systems comprised 36 of the 75 systems placed in the third quarter.

Margins

Gross profit in the reported quarter was $642.3 million, up 13.1% year over year. As a percentage of revenues, gross margin contracted 63 basis points (bps) to 69.7% in the quarter. The downside primarily indicates lower system ASPs and unfavorable revenue mix.

Outlook

For 2018, Intuitive Surgical continues to expect adjusted gross profit margin in the range of 70.5-71.5% compared with the previous guidance of 70-71.5% of net revenues.

Intuitive Surgical expects operating expense growth between 15.5% and 17% compared with the previously guided range of 16% and 18%.

Management at Intuitive Surgical expects non-cash stock compensation expenses between $255 million and $260 million compared with the previous guidance of $245 million and $255 million.

Intuitive Surgical forecasts 2018 procedure growth in the range of 17-18%, up from the previous band of 14.5-16.5%.

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months.

VGM Scores

At this time, Intuitive Surgical has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Intuitive Surgical has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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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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