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Intuitive Surgical (ISRG - Free Report) reported third-quarter 2023 adjusted earnings per share (EPS) of $1.46, which beat the Zacks Consensus Estimate of $1.41 by 3.5%. The bottom line improved 22.7% year over year.
GAAP EPS in the quarter was $1.16, up 28.9% from the year-ago quarter’s level.
Revenue Details
This Zacks Rank #3 (Hold) company reported revenues of $1.74 billion, up 11.5% from the prior-year quarter’s recorded number. Growth in the da Vinci procedure volume contributed to the improvement, which was partially offset by decline in systems revenue. On a constant currency (cc) basis, revenues were up 12% year over year. The top line, however, missed the Zacks Consensus Estimate by 1.7%.
Intuitive Surgical, Inc. Price, Consensus and EPS Surprise
Revenues from this segment totaled $1.07 billion, indicating a year-over-year improvement of 23%. This can be attributed to the da Vinci procedure’s 19% volume growth. The sales growth reflects an improvement in the da Vinci procedure volume and higher pricing.
Systems
This segment’s revenues totaled $379 million, down 11% year over year. Intuitive Surgical shipped 312 da Vinci Surgical Systems compared with 305 in the prior-year quarter. The company placed 159 systems in the United States compared with 175 in the year-ago period.
Outside the country, ISRG placed 153 systems compared with 130 in the prior-year quarter. Of these, 60 were in Europe, 32 in Japan and 10 in China.
Services
Revenues from this segment amounted to $292.9 million, up 1.9% from the year-ago quarter’s level.
Margins
Adjusted gross profit was $1.2 billion, up 10.5% year over year. As a percentage of revenues, the gross margin was 68.8%, down 100 bps from the prior-year quarter’s figure.
Selling, general and administrative expenses totaled $452 million, up 3.6% year over year. The figure was 7.8% lower than our estimates of $490.4 million.
Research and development expenses totaled $249.4 million, up 14.9% on a year-over-year basis. The figure missed our estimates of $250.9 million by 0.6%.
Adjusted operating income totaled $623.7 million, up 12.5% year over year. The figure was higher than our estimates of $617 million. As a percentage of revenues, the operating margin was 35.8%, up 20 bps sequentially.
Financial Position
Intuitive Surgical exited the third quarter with cash, cash equivalents and investments of $7.52 billion compared with $7.13 billion in the previous quarter.
Total assets increased to $14.7 billion from $13.9 billion in the prior quarter.
Wrapping Up
ISRG ended the third quarter on a mixed note, wherein earnings beat estimates but revenues missed the same. The top line, however, improved year over year. Revenues were primarily driven continued growth in the company’s da Vinci procedure volume. Intuitive Surgical has also been raising the pricing of procedures to fight inflationary pressure that also aided sales growth.
The company’s da Vinci system placement was also higher year-over-year, which should continue to boost procedure volume growth. However, a higher proportion of system placements under operating-lease arrangements hurt system sales. Although these arrangements for da Vinci systems are hurting upfront payments, they should lead to higher recurring revenues as customers pay over the course of the contract.
Meanwhile, the absence of any significant disruptions from COVID-19 during the third quarter seems promising, which may accelerate procedure growth going forward.
Although gross margin contracted, operating margin improved during the third quarter (as anticipated). The declining trend in operating expenses is likely to continue in the fourth quarter of 2023.
Despite better-than-expected earnings, shares of Intuitive Surgical declined more than 8% during after-hours trading on Oct 19, likely led by lower-than-expected revenues. However, the company’s shares have risen 3.1% year to date against the industry’s 11.7% decline. The S&P 500 Index has gained 13.8% during the same time frame.
Alcon has an estimated growth rate of 22.8% for 2023. ALC’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 8.03%. Alcon carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Alcon’s shares have lost 24.3% year to date against the industry’s 10.7% growth.
McKesson, carrying a Zacks Rank #2 at present, has an estimated growth rate of 4.4% for fiscal 2024. MCK’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 8.10%.
McKesson’s shares have risen 11.6% year to date compared with the industry’s 14.8% growth.
Edwards Lifesciences, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 8%. EW’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, delivering an average surprise of 1.62%.
Edwards Lifesciences’ shares have rallied 16.7% year to date compared with the industry’s 14.8% growth.
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Intuitive Surgical (ISRG) Q3 Earnings Beat, Procedures Robust
Intuitive Surgical (ISRG - Free Report) reported third-quarter 2023 adjusted earnings per share (EPS) of $1.46, which beat the Zacks Consensus Estimate of $1.41 by 3.5%. The bottom line improved 22.7% year over year.
GAAP EPS in the quarter was $1.16, up 28.9% from the year-ago quarter’s level.
Revenue Details
This Zacks Rank #3 (Hold) company reported revenues of $1.74 billion, up 11.5% from the prior-year quarter’s recorded number. Growth in the da Vinci procedure volume contributed to the improvement, which was partially offset by decline in systems revenue. On a constant currency (cc) basis, revenues were up 12% year over year. The top line, however, missed the Zacks Consensus Estimate by 1.7%.
Intuitive Surgical, Inc. Price, Consensus and EPS Surprise
Intuitive Surgical, Inc. price-consensus-eps-surprise-chart | Intuitive Surgical, Inc. Quote
Segmental Details
Instruments & Accessories
Revenues from this segment totaled $1.07 billion, indicating a year-over-year improvement of 23%. This can be attributed to the da Vinci procedure’s 19% volume growth. The sales growth reflects an improvement in the da Vinci procedure volume and higher pricing.
Systems
This segment’s revenues totaled $379 million, down 11% year over year. Intuitive Surgical shipped 312 da Vinci Surgical Systems compared with 305 in the prior-year quarter. The company placed 159 systems in the United States compared with 175 in the year-ago period.
Outside the country, ISRG placed 153 systems compared with 130 in the prior-year quarter. Of these, 60 were in Europe, 32 in Japan and 10 in China.
Services
Revenues from this segment amounted to $292.9 million, up 1.9% from the year-ago quarter’s level.
Margins
Adjusted gross profit was $1.2 billion, up 10.5% year over year. As a percentage of revenues, the gross margin was 68.8%, down 100 bps from the prior-year quarter’s figure.
Selling, general and administrative expenses totaled $452 million, up 3.6% year over year. The figure was 7.8% lower than our estimates of $490.4 million.
Research and development expenses totaled $249.4 million, up 14.9% on a year-over-year basis. The figure missed our estimates of $250.9 million by 0.6%.
Adjusted operating income totaled $623.7 million, up 12.5% year over year. The figure was higher than our estimates of $617 million. As a percentage of revenues, the operating margin was 35.8%, up 20 bps sequentially.
Financial Position
Intuitive Surgical exited the third quarter with cash, cash equivalents and investments of $7.52 billion compared with $7.13 billion in the previous quarter.
Total assets increased to $14.7 billion from $13.9 billion in the prior quarter.
Wrapping Up
ISRG ended the third quarter on a mixed note, wherein earnings beat estimates but revenues missed the same. The top line, however, improved year over year. Revenues were primarily driven continued growth in the company’s da Vinci procedure volume. Intuitive Surgical has also been raising the pricing of procedures to fight inflationary pressure that also aided sales growth.
The company’s da Vinci system placement was also higher year-over-year, which should continue to boost procedure volume growth. However, a higher proportion of system placements under operating-lease arrangements hurt system sales. Although these arrangements for da Vinci systems are hurting upfront payments, they should lead to higher recurring revenues as customers pay over the course of the contract.
Meanwhile, the absence of any significant disruptions from COVID-19 during the third quarter seems promising, which may accelerate procedure growth going forward.
Although gross margin contracted, operating margin improved during the third quarter (as anticipated). The declining trend in operating expenses is likely to continue in the fourth quarter of 2023.
Despite better-than-expected earnings, shares of Intuitive Surgical declined more than 8% during after-hours trading on Oct 19, likely led by lower-than-expected revenues. However, the company’s shares have risen 3.1% year to date against the industry’s 11.7% decline. The S&P 500 Index has gained 13.8% during the same time frame.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks in the broader medical space are Alcon (ALC - Free Report) , McKesson (MCK - Free Report) and Edwards Lifesciences (EW - Free Report) .
Alcon has an estimated growth rate of 22.8% for 2023. ALC’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 8.03%. Alcon carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Alcon’s shares have lost 24.3% year to date against the industry’s 10.7% growth.
McKesson, carrying a Zacks Rank #2 at present, has an estimated growth rate of 4.4% for fiscal 2024. MCK’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 8.10%.
McKesson’s shares have risen 11.6% year to date compared with the industry’s 14.8% growth.
Edwards Lifesciences, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 8%. EW’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, delivering an average surprise of 1.62%.
Edwards Lifesciences’ shares have rallied 16.7% year to date compared with the industry’s 14.8% growth.