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Intuitive Surgical (ISRG) to Post Q2 Earnings: What's in Store?

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Intuitive Surgical, Inc. (ISRG - Free Report) is scheduled to release second-quarter 2023 results on Jul 20, after the closing bell.

The company’s shares have risen 33.8% year to date compared with the industry’s 11.1% growth. The S&P 500 Index gained 18.9% in the same time frame.

In the last reported quarter, ISRG delivered a negative earnings surprise of 3.36%. Its earnings beat estimates in two of the trailing four quarters and missed the same in the other two, delivering an average surprise of 1.86%.

Zacks Investment Research
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Q2 Estimates

Currently, the Zacks Consensus Estimate for ISRG’s revenues is pegged at $1.73 billion, indicating a 13.8% improvement from the year-ago quarter’s figure. The consensus mark for earnings is pinned at $1.32 per share, indicating a 15.8% year-over-year increase.

Factors to Note

The Instruments & Accessories segment is likely to have witnessed a strong second quarter on the back of rising da Vinci procedure volume as seen in the past few quarters. However, unfavorable currency movement is expected to have partially offset gains from recovering demand in procedures. These factors may get reflected in the second-quarter results. The performance of this segment in China is yet to be seen. A potential recovery in China will further boost volume growth rate.

The Zacks Consensus Estimate for Instruments & Accessories revenues is pegged at $1.03 billion, indicating a 14.7% improvement year over year.

Intuitive Surgical’s da Vinci capital placements are likely to be on the lower side due to lesser trade-in of systems (majority of the U.S. customers have upgraded to newer generation systems). The potential downside can also be attributed to continued supply-chain challenges impacting availability of semiconductor components and growing capital spending pressure on hospitals amid rising inflationary pressure.

However, the FDA’s approval for use of the da Vinci SP surgical system for simple prostatectomy as a representative procedure in April might have expanded its application in urologic surgical procedures. The impact of this new approval is likely to get reflected in the second-quarter results.

The Zacks Consensus Estimate for the da Vinci system’s sales in the United States is pegged at 134 units.

However, Intuitive Surgical’s da Vinci capital placements are likely to have benefited from rising demand outside the country. The company placed 171 systems in the first quarter of 2023 compared with 125 in the prior-year quarter in ex-U.S. markets. The trend is likely to have continued in the to-be-reported quarter.

The single port platform’s growth is expected to have been driven by additional clinical indications and clearances in markets beyond the United States and Korea. The Zacks Consensus Estimate for the da Vinci system’s sales outside the United States is pinned at 142 units, indicating a 7.2% year-over-year improvement.

During the first quarter, Intuitive Surgical received CE-Mark for its Ion catheters and the launch of the same was expected to begin with the United Kingdom. The availability of Ion catheters in Europe is likely to have brought additional revenues during the second quarter.

The company may also provide a view on the uptake in the region. Intuitive Surgical’s digital product, Intuitive Hub, exhibited a strong year-over-year increase in the first quarter. This trend is expected to have continued in the quarter to be reported.

However, higher logistics cost amid supply-chain challenges and rising inflationary pressure are likely to have increased expenses, thereby hurting margins in the second quarter.

What the Zacks Model Unveils

Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here, as you will see below.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate ($1.30 per share) and the Zacks Consensus Estimate ($1.32 per share), is -1.29%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Zacks Rank: Intuitive Surgical currently has a Zacks Rank #2.

Stocks Worth a Look

Here are some medical stocks worth considering as these have the right combination of elements to post an earnings beat this reporting cycle.

McKesson (MCK - Free Report) has an Earnings ESP of +1.93% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The stock has gained 9.5% year to date. MCK’s earnings beat estimates in the last reported quarter. McKesson has a four-quarter earnings surprise of 4.48%, on average.

Avanos Medical (AVNS - Free Report) has an Earnings ESP of +3.03% and a Zacks Rank of 3.

The stock has lost 3.5% year to date. AVNS’ earnings missed estimates in the last reported quarter. Masimo has a training four-quarter average earnings surprise of 8.03%.

Pacific Biosciences of California (PACB - Free Report) has an Earnings ESP of +5.88% and a Zacks Rank of 3.

The stock has gained 67.3% year to date. PACB’s earnings beat estimates in the last reported quarter. Integer Holdings has a negative four-quarter average earnings surprise of 3.66%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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