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Intuitive Surgical (ISRG) Up 4.9% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Intuitive Surgical, Inc. (ISRG - Free Report) . Shares have added about 4.9% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is ISRG 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 drivers.

Recent Earnings

Intuitive Surgical reported first-quarter 2018 adjusted earnings of $2.44 per share, which beat the Zacks Consensus Estimate by 22.6%. Earnings also improved 42.7% on year-over-year basis.

Revenues totaled $848 million, up 24.7% from the prior-year quarter. Revenues also surpassed the Zacks Consensus Estimate by 10.6%.

The solid performance was backed by higher worldwide da Vinci procedures led by growth in U.S. general surgery procedures and global urologic procedures. Per management, revenues also gained from around a 2.5% drop in dollar.

Segment Details

Instruments & Accessories

Revenues came in at $460.3 million, which reflects a year-over-year increase of 20.9%. Per management, 15% growth in da Vinci procedure volume primarily drove the upside.

In Japan, 12 da Vinci procedures within the specialties of general surgery, gynecology, and cardiothoracic surgery were granted a national reimbursement status.

Systems

In the reported quarter, system revenues increased 45.8% year over year to $234.5 million. Notably, 185 da Vinci Surgical systems were shipped by the company, up 39.1% year over year.

In the quarter under review, shipments included 43 systems under operating lease arrangements, compared with 21 in the year-ago quarter.

Services

Services revenues came in at $152.7, up 10.7% from a year ago.

International Sales Up

Outside the United States, revenues totaled $275 million, up 49% on a year-over-year basis and 11% sequentially. The upside can be attributed to an increase in systems revenue of 55 million and higher instruments and accessories revenues of 30 million.

OUS procedures grew 18% year over year, with 73 system placements in the reported quarter, compared with 56 in the year-ago quarter. The first quarter of 2018 placements include 45 in Europe and 9 in Japan.

Margins

Gross margin was 71.6%, down 40 basis points (bps) year over year.

In the first quarter of 2018, operating income increased 30.1% on a year-over year basis to $346 million.

Financial Condition

The company ended the first quarter with $4.1 billion in cash, cash equivalents and investments, reflecting an increase of $222 million in the quarter, primarily driven by cash generated from operations.

The company has not repurchased any share in the quarter and has approximately $718 million remaining under its board’s buyback authorization.

Outlook

The company has not issued any guidance.

However, management feels that U.S. revenues might experience a low single-digit decline because of lackluster performance in the gynecology and benign hysterectomy market.

Management also feels that margins will fluctuate due to a mix of newer products of systems and accessory revenues.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been eight revisions higher for the current quarter.

VGM Scores

At this time, ISRG has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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.

Zacks style scores indicate that the company's stock is suitable for growth and momentum investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise. ISRG has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.




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