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Intuitive Surgical, Inc. designs, manufactures, and markets da Vinci surgical systems for various surgical procedures, including urologic, gynecologic, cardiothoracic, general, and head and neck surgeries. Its da Vinci surgical system consists of a surgeon's console or consoles, a patient-side cart, a 3-D vision system, Firefly fluorescence imaging product, da Vinci skills simulator, and proprietary wristed' instruments. The company was founded in 1995 and is headquartered in Sunnyvale, California.
ISRG Tops Expectations in Eleven Straight Quarters
Intuitive Surgical has beaten the Zacks Consensus Estimate in each of the last eleven quarters. Over the last six quarters, the company has beaten the bottom line number by an average of $0.30 or about 12%. On the top line, the company has beaten the Zacks Consensus Estimate by an average of $12 million per quarter or about 3%.
Over the course of the last five earnings reports, Wall Street has reacted mostly positive to the positive earnings surprises. On average, the stock has moved higher by 5% following earnings.
Intuitive Surgical Most Recent Earnings Report
On January 19, 2012 the company reported revenue of $497 million roughly $13 million more than the Zacks Consensus Estimate and higher than the $389 million reported in the year ago period. EPS of $3.75 was $0.41 ahead of the estimate or a 12% beat. Following the report, the stock moved lower by 5%.
Earnings Estimates Bumped Up
Following the most recent earnings report, analysts bumped up their earnings estimates for 2012. The Zacks Consensus Estimate for 2012 EPS moved from $14.07 in December 2011 to the current level of $14.53. The 2013 estimate was also bumped higher following the most recent earnings release, moving from $15.89 in December to the current level of $16.85.
Next Earnings Report Coming Soon
Intuitive Surgical reports earnings on April 17 after the close of the market. The Zacks Consensus Estimate is calling for $466 million in revenue and $3.14 of EPS. In the year ago period, the company reported revenue of $388 million and $2.59 in EPS and the stock moved higher by about 2% following the release.
When a stock has a steady history of beating the estimate and raising estimates for the future, a premium valuation is generally also present. That is the case for ISRG. A 43x trailing PE multiple and a 37x forward PE multiple are both well above an industry average that is just below 15x for both multiples. Price to book of almost 8x is also well above the industry average of 2.3x and price to sales is higher than the industry average. Consistency and leadership comes at a price.
When we look at the price and consensus chart for Intuitive Surgical, we see the stock following the earnings estimates throughout much of 2010 and 2011. 2012 and 2013 are seeing estimates rise significantly above past expectations as sales of the da Vinci system increase and become the mainstream alternative in the health care world. When aggressive growth investors see the estimates well above the stock price, it is generally a sign that the stock is undervalued. Intuitive Surgical is a Zacks #1 Rank (Strong Buy).
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