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Intuitive Surgical (ISRG) Beats on Q3 Earnings & Revenues
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Intuitive Surgical Inc. (ISRG - Free Report) posted adjusted earnings of $2.77 per share in the third quarter of 2017, crushing the Zacks Consensus Estimate of $1.97 on stellar revenue growth. Also, the figure improved 34.5% on a year-over-year basis. Interestingly, over the past four quarters, the company beat estimates at an average of 7.8%.
Revenues increased 18% year over year to $806.1 million, driven by growth in instrument, accessory and service, and systems revenues. Revenues also beat the Zacks Consensus Estimate of $752 million.
It is important to note that the company’s stockholders approved a three-for-one split of the issued and outstanding common stock, which began trading on a split-adjusted basis on Oct 6. The stock currently has a Zacks Rank #3 (Hold).
Intuitive Surgical, Inc. Price, Consensus and EPS Surprise
Solid Procedure Trends: Intuitive Surgical posted solid numbers in the quarter, courtesy of rising customer adoption of procedures and growth in system placements. The company outperformed in the Mature and Growth procedures, especially in general and thoracic surgery.
Precisely, third-quarter procedures increased approximately 15% on a year-over-year basis. U.S. procedures grew approximately 12% and outside of the United States (OUS) procedures grew approximately 23% year over year. Procedure performance in Asia showed continued strength on solid growth in China, Japan and Korea. Added to this, solid growth in prostatectomy procedure volumes lent Intuitive Surgical a competitive edge in the broader prostate surgery market in the third quarter.
Launches Bode Well: In the third quarter, Intuitive Surgical expanded the launch of two additional instruments and accessories for da Vinci X and Xi platforms in seven countries. In fact, the company initiated a limited launch of a refined vessel sealer in Europe in the reported quarter. Management announced plans to file the first 510(k) for FDA approval of da Vinci SP program by year-end, and submissions for additional indications thereafter.
International Sales: Globally, Intuitive Surgical’s system placements included 25 in Europe, 14 in Japan, five in India, four in New Mexico and one in China. However, as the OUS markets are in early stages of adoption, sales might be lower than estimated in the region.
Revenue Segments
Instruments and Accessories: Revenues at the segment grew 15% to $401 million in the quarter, driven by strong procedure growth and increased sales of stapling and vessel sealing products. Revenues realized per procedure were approximately $1,880 compared with $1,870 in the year-ago quarter.
System:Sales increased 15% to $237 million buoyed by higher system placements, partially offset by lower average selling prices. Notably, Intuitive Surgical generated approximately $7 million in revenues associated with operating leases in the reported quarter compared with $4 million in the third quarter of 2016. Coming to the company’s flagship da Vinci surgical platform, the company shipped 169 surgical systems, up from 134 in the third quarter of 2016.
Service:The company registered revenues of $147 million, up 13% on a year-over-year basis on growth in the installed base of da Vinci systems.
Margin
Intuitive Surgical’s adjusted gross margin in the reported quarter contracted 130 basis points (bps) to 71.8% of net revenues. The decrease in margins was due to a $7-million medical device tax refund, which was received in 2016.
Notably, management at Intuitive Surgical expects margins to fluctuate based on the company’s mix of new products, mix of systems in instrument and accessory revenue, reduction of product costs and the reinstatement of the medical device tax in 2018.
Financial Update
Intuitive Surgical ended the third quarter of 2017 with $3.8 billion in cash, cash equivalents, and investments, up by $379 billion on a year-over-year basis. This was primarily driven by cash generated from operations and employee stock-option exercises.
Bottom Line
Intuitive Surgical exited the third quarter on a solid note, beating the Zacks Consensus Estimate on both the counts. Procedure performance in Asia showed continued strength with solid growth in China, Japan and Korea. The company gained significantly on the CE Mark approval for da Vinci X in Europe. The stock has got a further boost on the recent FDA approval of the same in the recent past. A positive outlook for the coming quarters also raises our confidence in the stock. Further, incremental spending on product development and higher investments in international markets are likely to drive long-term growth. However, the da Vinci Surgical System has a long sale and purchase order cycle which might act against the company. In fact, the stock looks a tad expensive, adding to our concerns. Intuitive Surgical expects sales to be lower outside the United States.
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EnteroMedics has an average earnings beat of 55.8% for the trailing four quarters. The company has a solid return of 7.1% for the past month.
Luminex came up with a positive earnings surprise of 188.9% last quarter. The stock has a long-term expected earnings growth rate of 16.3%.
Wall Street’s Next Amazon
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Intuitive Surgical (ISRG) Beats on Q3 Earnings & Revenues
Intuitive Surgical Inc. (ISRG - Free Report) posted adjusted earnings of $2.77 per share in the third quarter of 2017, crushing the Zacks Consensus Estimate of $1.97 on stellar revenue growth. Also, the figure improved 34.5% on a year-over-year basis. Interestingly, over the past four quarters, the company beat estimates at an average of 7.8%.
Revenues increased 18% year over year to $806.1 million, driven by growth in instrument, accessory and service, and systems revenues. Revenues also beat the Zacks Consensus Estimate of $752 million.
It is important to note that the company’s stockholders approved a three-for-one split of the issued and outstanding common stock, which began trading on a split-adjusted basis on Oct 6. The stock currently has a Zacks Rank #3 (Hold).
Intuitive Surgical, Inc. Price, Consensus and EPS Surprise
Intuitive Surgical, Inc. Price, Consensus and EPS Surprise | Intuitive Surgical, Inc. Quote
Business Highlights
Solid Procedure Trends: Intuitive Surgical posted solid numbers in the quarter, courtesy of rising customer adoption of procedures and growth in system placements. The company outperformed in the Mature and Growth procedures, especially in general and thoracic surgery.
Precisely, third-quarter procedures increased approximately 15% on a year-over-year basis. U.S. procedures grew approximately 12% and outside of the United States (OUS) procedures grew approximately 23% year over year. Procedure performance in Asia showed continued strength on solid growth in China, Japan and Korea. Added to this, solid growth in prostatectomy procedure volumes lent Intuitive Surgical a competitive edge in the broader prostate surgery market in the third quarter.
Launches Bode Well: In the third quarter, Intuitive Surgical expanded the launch of two additional instruments and accessories for da Vinci X and Xi platforms in seven countries. In fact, the company initiated a limited launch of a refined vessel sealer in Europe in the reported quarter. Management announced plans to file the first 510(k) for FDA approval of da Vinci SP program by year-end, and submissions for additional indications thereafter.
International Sales: Globally, Intuitive Surgical’s system placements included 25 in Europe, 14 in Japan, five in India, four in New Mexico and one in China. However, as the OUS markets are in early stages of adoption, sales might be lower than estimated in the region.
Revenue Segments
Instruments and Accessories: Revenues at the segment grew 15% to $401 million in the quarter, driven by strong procedure growth and increased sales of stapling and vessel sealing products. Revenues realized per procedure were approximately $1,880 compared with $1,870 in the year-ago quarter.
System:Sales increased 15% to $237 million buoyed by higher system placements, partially offset by lower average selling prices. Notably, Intuitive Surgical generated approximately $7 million in revenues associated with operating leases in the reported quarter compared with $4 million in the third quarter of 2016. Coming to the company’s flagship da Vinci surgical platform, the company shipped 169 surgical systems, up from 134 in the third quarter of 2016.
Service:The company registered revenues of $147 million, up 13% on a year-over-year basis on growth in the installed base of da Vinci systems.
Margin
Intuitive Surgical’s adjusted gross margin in the reported quarter contracted 130 basis points (bps) to 71.8% of net revenues. The decrease in margins was due to a $7-million medical device tax refund, which was received in 2016.
Notably, management at Intuitive Surgical expects margins to fluctuate based on the company’s mix of new products, mix of systems in instrument and accessory revenue, reduction of product costs and the reinstatement of the medical device tax in 2018.
Financial Update
Intuitive Surgical ended the third quarter of 2017 with $3.8 billion in cash, cash equivalents, and investments, up by $379 billion on a year-over-year basis. This was primarily driven by cash generated from operations and employee stock-option exercises.
Bottom Line
Intuitive Surgical exited the third quarter on a solid note, beating the Zacks Consensus Estimate on both the counts. Procedure performance in Asia showed continued strength with solid growth in China, Japan and Korea. The company gained significantly on the CE Mark approval for da Vinci X in Europe. The stock has got a further boost on the recent FDA approval of the same in the recent past. A positive outlook for the coming quarters also raises our confidence in the stock. Further, incremental spending on product development and higher investments in international markets are likely to drive long-term growth. However, the da Vinci Surgical System has a long sale and purchase order cycle which might act against the company. In fact, the stock looks a tad expensive, adding to our concerns. Intuitive Surgical expects sales to be lower outside the United States.
Key Picks
A few better-ranked stocks in the broader medical sector are SONOVA HOLDING (SONVY - Free Report) , EnteroMedics Inc. and Luminex Corporation . All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
SONOVA represented a solid return of 8.1% over the last three months. The company has a long-term expected earnings growth rate of 7%.
EnteroMedics has an average earnings beat of 55.8% for the trailing four quarters. The company has a solid return of 7.1% for the past month.
Luminex came up with a positive earnings surprise of 188.9% last quarter. The stock has a long-term expected earnings growth rate of 16.3%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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