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Intuitive Surgical (ISRG - Free Report) reported third-quarter 2022 adjusted earnings per share (EPS) of $1.19, which beat the Zacks Consensus Estimate of $1.16 per share by 8.2%. The bottom line remained flat year over year. The adjusted EPS also beat our estimate for EPS by 5.3%.
GAAP EPS in the quarter was 90 cents compared with the year-ago quarter’s figure of $1.04 per share.
Revenue Details
This Zacks Rank #3 (Hold) company reported revenues of $1.56 billion, which climbed 11% from the prior-year quarter. Growth in da Vinci procedure volume contributed to the improvement. The top line also beat the Zacks Consensus Estimate by 2.6%. However, it missed our estimate for total revenues by 3.2%.
Intuitive Surgical, Inc. Price, Consensus and EPS Surprise
Revenues at the segment totaled $871.6 million, reflecting a year-over-year improvement of 15.4%. This can be attributed to 20% da Vinci procedure volume growth. This was partially offset by foreign currency impacts. The procedure volume growth in the United States reflects a favorable comparison with the year-ago quarter, given the impact of the Delta variant last year. Moreover, procedure volume showed a recovery from the impact of COVID-related lockdowns in China, boosting the ex-U.S. growth rate.
Systems
In the reported quarter, System revenues gained 2.6% year over year to $425.9 million. The company shipped 305 da Vinci Surgical Systems in the quarter, compared with 336 systems in the prior-year quarter. The company placed 175 systems in the United States compared with 227 systems placed in the year-ago quarter. Outside the United States, Intuitive Surgical placed 130 systems in the third quarter compared with 109 in the prior-year quarter. Of these, 54 were in Europe, 32 in Japan and 17 in China.
Services
Services revenues were $259.9 million, up 11.7% from the year-ago quarter.
Margins
Adjusted gross profit in the reported quarter was $1.09 billion, up 3.2% year over year. As a percentage of revenues, the gross margin in the quarter was 69.8%, up 60 basis points (bps) from the previous quarter.
Selling, general and administrative expenses amounted to $436.1 million, up 20% from the prior-year quarter. The SG&A expense was slightly higher than our estimate of $435.6 million. Research and development expenses totaled $217.1 million, up 31.2% on a year-over-year basis. The R&D expense was in line with our estimate.
Adjusted operating income totaled $554.6 million, up 4.4% year over year. The figure was higher than our estimate for adjusted operating expense of $546.9 million. As a percentage of revenues, the operating margin in the quarter was 35.6%, up 70 bps quarter over quarter.
Financial Position
The company exited the third quarter with cash, cash equivalents and investments of $7.39 billion, compared with $8.18 billion in the previous quarter.
Total assets were $13.26 billion, compared with $13.71 billion sequentially.
Wrapping Up
Intuitive Surgical ended the third quarter on a strong note, wherein both earnings and revenues beat the consensus mark. The company displayed strong segmental performance in the quarter under review. It witnessed growth in da Vinci procedure volume in the third quarter. Overall international sales improved in the third quarter. Based on strong demand for procedures, the company raised guidance for procedure volume growth for full-year 2022 from 14%-16.5% to 17%-18%.
The expansion in both gross and operating margins buoys optimism. The company now expects its pro-forma operating expense to grow 21%-23%, lower than the previous guidance of 23%-25%. The company also expects operating expense to decline in 2023.
Better-than-expected quarterly results on the back of continued growth in procedure volumes across all geographies seem to have cheered investors. Shares were up 10.4% in pre-market trading on Oct 19, following the company’s results announced after market close yesterday. However, the company’s shares have lost 46.1% so far this year compared with the industry’s decline of 34.4%.
The intense competition in the global MedTech space remains a concern.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , ShockWave Medical, Inc. (SWAV - Free Report) and McKesson Corporation (MCK - Free Report) .
AMN Healthcare, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 3.2%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 15.7%.
AMN Healthcarehas lost 7.3% compared with the industry’s 39.1% fall in the past year.
ShockWave Medical, sporting a Zacks Rank #1 at present, has an estimated growth rate of 33.1% for 2023. SWAV’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
ShockWave Medical has gained 38.2% against the industry’s 33.1% decline over the past year.
McKesson, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 10.1%. MCK’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average beat being 13%.
McKesson has gained 70.9% against the industry’s 17.6% fall over the past year.
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Intuitive Surgical (ISRG) Q3 Earnings Beat, Procedures Recover
Intuitive Surgical (ISRG - Free Report) reported third-quarter 2022 adjusted earnings per share (EPS) of $1.19, which beat the Zacks Consensus Estimate of $1.16 per share by 8.2%. The bottom line remained flat year over year. The adjusted EPS also beat our estimate for EPS by 5.3%.
GAAP EPS in the quarter was 90 cents compared with the year-ago quarter’s figure of $1.04 per share.
Revenue Details
This Zacks Rank #3 (Hold) company reported revenues of $1.56 billion, which climbed 11% from the prior-year quarter. Growth in da Vinci procedure volume contributed to the improvement. The top line also beat the Zacks Consensus Estimate by 2.6%. However, it missed our estimate for total revenues by 3.2%.
Intuitive Surgical, Inc. Price, Consensus and EPS Surprise
Intuitive Surgical, Inc. price-consensus-eps-surprise-chart | Intuitive Surgical, Inc. Quote
Segment Details
Instruments & Accessories
Revenues at the segment totaled $871.6 million, reflecting a year-over-year improvement of 15.4%. This can be attributed to 20% da Vinci procedure volume growth. This was partially offset by foreign currency impacts. The procedure volume growth in the United States reflects a favorable comparison with the year-ago quarter, given the impact of the Delta variant last year. Moreover, procedure volume showed a recovery from the impact of COVID-related lockdowns in China, boosting the ex-U.S. growth rate.
Systems
In the reported quarter, System revenues gained 2.6% year over year to $425.9 million. The company shipped 305 da Vinci Surgical Systems in the quarter, compared with 336 systems in the prior-year quarter. The company placed 175 systems in the United States compared with 227 systems placed in the year-ago quarter. Outside the United States, Intuitive Surgical placed 130 systems in the third quarter compared with 109 in the prior-year quarter. Of these, 54 were in Europe, 32 in Japan and 17 in China.
Services
Services revenues were $259.9 million, up 11.7% from the year-ago quarter.
Margins
Adjusted gross profit in the reported quarter was $1.09 billion, up 3.2% year over year. As a percentage of revenues, the gross margin in the quarter was 69.8%, up 60 basis points (bps) from the previous quarter.
Selling, general and administrative expenses amounted to $436.1 million, up 20% from the prior-year quarter. The SG&A expense was slightly higher than our estimate of $435.6 million. Research and development expenses totaled $217.1 million, up 31.2% on a year-over-year basis. The R&D expense was in line with our estimate.
Adjusted operating income totaled $554.6 million, up 4.4% year over year. The figure was higher than our estimate for adjusted operating expense of $546.9 million. As a percentage of revenues, the operating margin in the quarter was 35.6%, up 70 bps quarter over quarter.
Financial Position
The company exited the third quarter with cash, cash equivalents and investments of $7.39 billion, compared with $8.18 billion in the previous quarter.
Total assets were $13.26 billion, compared with $13.71 billion sequentially.
Wrapping Up
Intuitive Surgical ended the third quarter on a strong note, wherein both earnings and revenues beat the consensus mark. The company displayed strong segmental performance in the quarter under review. It witnessed growth in da Vinci procedure volume in the third quarter. Overall international sales improved in the third quarter. Based on strong demand for procedures, the company raised guidance for procedure volume growth for full-year 2022 from 14%-16.5% to 17%-18%.
The expansion in both gross and operating margins buoys optimism. The company now expects its pro-forma operating expense to grow 21%-23%, lower than the previous guidance of 23%-25%. The company also expects operating expense to decline in 2023.
Better-than-expected quarterly results on the back of continued growth in procedure volumes across all geographies seem to have cheered investors. Shares were up 10.4% in pre-market trading on Oct 19, following the company’s results announced after market close yesterday. However, the company’s shares have lost 46.1% so far this year compared with the industry’s decline of 34.4%.
The intense competition in the global MedTech space remains a concern.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , ShockWave Medical, Inc. (SWAV - Free Report) and McKesson Corporation (MCK - Free Report) .
AMN Healthcare, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 3.2%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 15.7%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcarehas lost 7.3% compared with the industry’s 39.1% fall in the past year.
ShockWave Medical, sporting a Zacks Rank #1 at present, has an estimated growth rate of 33.1% for 2023. SWAV’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
ShockWave Medical has gained 38.2% against the industry’s 33.1% decline over the past year.
McKesson, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 10.1%. MCK’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average beat being 13%.
McKesson has gained 70.9% against the industry’s 17.6% fall over the past year.