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Intuitive Surgical, Inc. (ISRG) Up 24.6% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Intuitive Surgical, Inc. (ISRG - Free Report) . Shares have added about 24.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Intuitive Surgical, Inc. due for a pullback? 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 & Revenues Beat Estimates

Intuitive Surgical 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

The 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%.

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.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

At this time, Intuitive Surgical, Inc. has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, 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

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Intuitive Surgical, Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Intuitive Surgical, Inc. is part of the Zacks Medical - Instruments industry. Over the past month, AngioDynamics (ANGO - Free Report) , a stock from the same industry, has gained 1.1%. The company reported its results for the quarter ended August 2022 more than a month ago.

AngioDynamics reported revenues of $81.54 million in the last reported quarter, representing a year-over-year change of +5.9%. EPS of -$0.06 for the same period compares with -$0.02 a year ago.

AngioDynamics is expected to post a loss of $0.01 per share for the current quarter, representing a year-over-year change of +50%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

AngioDynamics has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.


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