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We expect Intuitive Surgical (ISRG - Analyst Report) to beat expectations when it reports fourth quarter 2012 results on January 22. 

Why a Likely Positive Surprise?

Our proven model shows that Intuitive Surgical is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is at +2.5%. This is a meaningful and leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #2 (Buy): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.

The combination of Intuitive Surgical’s Zacks Rank #2 (Buy) and Earnings ESP of +2.5% makes us confident of a positive earnings beat this coming announcement.

What is Driving the Better than Expected Earnings?

Intuitive Surgical faces little direct competition in robotic surgery, except from Accuray (ARAY - Analyst Report) in certain niches. The installed base of Intuitive Surgical continues to grow steadily as hospitals are compelled to upgrade their systems.

The positive trend is seen in the trailing four-quarter average surprise of 14.5%, which was greatly helped by the 28.2% surprise in the last reported quarter.

Other Stocks to Consider

Intuitive Surgical is not the only stock looking up this earnings season. We also see likely earnings beats coming from these two players.

NuVasive, Inc. (NUVA - Snapshot Report) has Earnings ESP of +72.7% and Zacks Rank #1 (Strong Buy). The company reports earnings on Feb 26, 2013.

Becton, Dickinson and Company (BDX - Analyst Report) has Earnings ESP of +3.3% and Zacks Rank #2 (Buy). The company reports earnings on Feb 5, 2013.

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