Earnings Preview: Will Intuitive Surgical Surprise The Street Again?

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ISRG: Intuitive Surgical logo
ISRG
Intuitive Surgical

Intuitive Surgical (NASDAQ: ISRG) will report its Q3 2016 earnings on October 18th. The company’s stock continues to perform well and reached an all-time-high of $720 per share this month. Intuitive has been able to beat street estimates in recent quarters. Could this happen again? We expect the company to continue its solid performance in the third quarter.

Procedure growth, greater adoption in thoracic and colorectal surgery, and ventral hernia repair, along with increased international shipments likely all drove volume growth in the quarter. We also expect the company to report a sequential increase in shipments and revenue from operating leases. The company also is likely to report reduced contribution of instruments & accessories in the total revenue on account of increased revenue from full systems shipments for Q3. As such, the gross margin is expected to be slightly lower than in Q2 because of this change in revenue mix. Furthermore, Intuitive reported a strong cash position last quarter, with about $4.2 billion in cash and other short- and long-term investments, which is over 15% of its current market capitalization. We expect the management to delineate its capital deployment strategy.

Our price estimate of Intuitive Surgical is $687, pending our review of the quarter’s results.

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What’s Driving Shipment Growth?

Robotics surgery is still in a fledgling state. There is network-effect at play here. More results establishing the superiority of robot assisted surgery, over other minimally invasive surgery, will further increase adoption. Moreover, real competition, with a market-ready product, is still some time away. We expect Intuitive to continue to post-strong results. The below shows consensus estimates for Q3 of fiscal 2016:

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Also Read: Intuitive Surgical’s Potential Future Growth Strategy

Please refer to our complete analysis for Intutitive Surgical for detailed analysis.

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