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Intuitive Surgical (ISRG) Earnings Miss, Revenues Beat in Q4

Intuitive Surgical, IncISRG reported adjusted earnings of $2.96 per share in the fourth quarter of 2018, which fell short of the Zacks Consensus Estimate of $2.99. Adjusted earnings improved 13.8% year over year.

Revenues totaled $1.05 billion improved 17.3% from the prior-year quarter and surpassed the Zacks Consensus Estimate of $1.04 billion.

Meanwhile, over the past year, the Zacks Racks #2 (Buy) stock has rallied 19.2% compared with the industry 's 2.1% gain and the S&P 500 index's 7% decline.

2018 Results at a Glance

On a full-year basis, the company reported adjusted earnings of $10.99 which lagged the Zacks Consensus Estimate by 0.3%. Earnings grew 20.9% from 2017.

Full-year revenues totaled $3.72 billion, edging past the Zacks Consensus Estimate of $3.71 billion. Revenues grew 18.7% from 2017.

The company reports through three segments - Instruments & Accessories, Systems and Services.

For 2018, Instruments & Accessories revenues were $1.96 billion (52.7% of net revenues), Systems sales were $1.13 billion (30.3%) and Services sales totaled $635.1 million (17%).

Intuitive Surgical, Inc. Price, Consensus and EPS Surprise

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

Segment Details

Instruments & Accessories

Revenues at the segment came in at $ 539.3 million, which reflects year-over-year increase of 18%. The uptick was primarily driven by 19% growth in worldwide da Vinci procedure volumes.

Systems

In the reported quarter, System revenues increased 19.7% year over year to $340.6 million. Per management, Intuitive Surgical shipped 290 da Vinci Surgical Systems in the fourth quarter compared with 216 systems in the year-ago quarter.

Per management, the install base of da Vinci systems increased 13% on a year-over-year basis.

Services

Services revenues came in at $166.6 million, up 10.8% from the year-ago quarter.

International Sales Up

Outside the United States, revenues totaled $307 million, up 24% on a year-over-year basis and 25% sequentially. The upside can be attributed to a 24% increase in international procedures.

Outside the United States, Intuitive Surgical placed 115 systems in the reported quarter compared with 86 in the fourth quarter of 2017. Of these, 35 were X systems. This included 55 in Europe, 31 in Japan, and nine in Brazil.

Margins

Adjusted gross profit in the reported quarter was $751.2 million, up 16.3% year over year. As a percentage of revenues, adjusted gross margin in the quarter was 71.8% which contracted 60 basis points (bps). Per management, the downside reflects product mix in costs associated with new products.

Adjusted operating income totaled $411.8 million, up 6.7% year over year. As a percentage of revenues, adjusted operating margin in the quarter was 39.4%, down 390 bps.

For investors' notice, Intuitive Surgical's fourth-quarter operating expenses include a $25 million contribution to the newly-formed Intuitive Foundation.

2019 Outlook

Intuitive Surgical did not issue any guidance.

However, management expects 2019 procedure growth in the range of 13-17%, driven by U.S. general surgery and procedures. Adjusted operating expenses are expected to rise 20-28%.

Wrapping Up

Intuitive Surgical ended the fourth quarter on a mixed note. While earnings fell short of estimates, revenues surpassed the same. The flagship da Vinci procedures also recorded solid growth in the quarter. In fact, management expects procedure growth to favor results in the quarters to come. The company looks to accelerate its business in China, following the clearance of da Vinci Xi. Management is also optimistic about the 510(k) submission for the TransOral Robotic Surgery and the Phase I launch of da Vinci SP. The newly formed Intuitive Foundation is expected to improve patient outcome.

On the flip side, contraction in the company's gross and operating margins is worrisome. Management expects margins to fluctuate due to newer product mixes and surging operating expenses. Additionally, the da Vinci system is in the early stages of adoption in some of the markets outside the United States which is likely to hurt placements in the regions. Intense competition in the global MedTech space adds to the woes.

Earnings of Other MedTech Majors at a Glance

Other top-ranked MedTech stocks which posted solid results this earnings season are Varian Medical Systems VAR , AngioDynamics ANGO and CONMED Corporation CNMD .

Varian's fiscal first-quarter adjusted earnings of $1.06 per share were in line with the Zacks Consensus Estimate. Revenues of $741 million outpaced the consensus mark of $717.9 million. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

AngioDynamics' fiscal second-quarter adjusted earnings of 22 cents per share beat the Zacks Consensus Estimate by a penny. Revenues totaled $91.5 million, surpassing the Zacks Consensus Estimate by 2.9%. The stock flaunts a Zacks Rank #1.

CONMED's fourth-quarter adjusted earnings per share of 73 cents met the Zacks Consensus Estimate. Revenues of $242.4 million surpassed the Zacks Consensus Estimate of $229.2 million. The stock carries a Zacks Rank #2.

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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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