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Intuitive Surgical: Strong Growth In Procedures And daVinci Shipments Drove Q4'16 Results

Intuitive Surgical ( ISRG ) announced its Q4 2016 on Tuesday, January 24th. At $757 million, the company's overall revenue increased 12% in Q4. In terms of the business segments, instruments and accessories revenue in Q4 came in at $386 million, up by 19% year over year. The company's instruments and accessories revenue growth in Q4 was primarily driven by 15% growth in da Vinci procedures. Furthermore, Intuitive's da Vinci surgical systems revenue increased by 2% year over year to approximately $236 million. It should be noted that the company shipped 163 da Vinci Surgical Systems in Q4, as compared to 158 in the prior year quarter.

The company's stock price has increased by approximately 20% over the last year, owing to the strong growth in da Vinci procedures and daVinci shipments. The procedure volume and daVinci shipments increased by 15% and 10%, respectively, in 2016. To drive growth in 2017 and beyond, the company is focused on the following points:

  • Continued adoption of da Vinci in general surgery.
  • Increasing adoption of daVinci systems in European and Asian markets. For this, the company is seeking economic validation of its daVinci systems globally, by conducting clinical trials.
  • Advancing to new platforms, which include imaging, advanced instruments, da Vinci Sp and diagnostic platform progress.

We are in the process of updating our model for Intuitive Surgical.

Should We Not Expect Any Major Moves From Intuitive In 2017?

With the strong adoption of Intuitive's daVinci systems in various surgical applications, the company has seen a significant rise in the number of procedures globally. This has resulted in increased orders for daVinci systems and a rise in the recurring revenues. Intuitive's strong revenue growth has enhanced its cash position. Combined, the company's cash and cash equivalents plus short and long-term investments have increased from $3.3 billion in Q4'15 to $4.8 billion in Q4'16. Thus, Intuitive is in a strong position to make any interesting acquisitions or to increase its R&D to expand its robotic surgeries to other areas. This approach should have strengthened Intuitive's economic moats.

However, the company in mid-December announced that it was increasing its stock buy-back program from $1 billion to $3 billion. Intuitive plans to fund this through its existing cash and cash equivalents. This move came in soon after the company's stock price declined by 13% since it reached an all time high of $721 in October 2016. If the buy back program were to be implemented immediately, it would result in an increase in Intuitive's earnings per share. However, it decreases the chances that the company will announce any potential acquisition or increase its R&D in the near term.

Significant Room For Expansion Still Exists For Intuitive

Intuitive has managed to ship 537 daVinci systems in 2016, up by approximately 10% from 2015. This demonstrates that its strong adoption of daVinci systems. The installed base of its da Vinci surgical systems has grown from about 1,800 in 2010 to around 4,000 in 2016. More importantly, with a rise in the installed base of daVinci systems, Intuitive is likely to garner higher instruments and accessories revenues from its customers in future.

Furthermore, Intuitive has little presence outside the U.S. Only 25% of the total daVinci procedures in 2016 were performed outside U.S. Going ahead, we can expect stronger adoption of daVinci Systems internationally, which can drive higher revenues for the company. For this, the company is seeking economic validation of its daVinci systems globally by conducting clinical trials.

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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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