Intuitive Surgical’s Full Year 2019 Earnings Could Be Slightly Below Consensus

Intuitive Surgical’s (NASDAQ:ISRG) is slated to release its Q4 and full-year 2019 results on Thursday, January 23, 2020. For full year 2019, Trefis estimates that the company will likely report:

• Revenues of $4.3 billion, reflecting 17% y-o-y growth, primarily driven by the company’s instruments & accessories segment. Our revenue forecast is marginally lower than the consensus estimate of $4.4 billion.
• EPS figure will likely increase to $12.60 on an adjusted basis, primarily due to higher revenues, partly offset by a slight decline in margins, as compared to the previous year. Our EPS figure forecast is slightly below the consensus estimate of $12.64.

We believe that lower-than-expected earnings for full year 2019 could result in a slight decline in Intuitive Surgical’s stock price, post the  earnings announcement.  In fact, our forecast indicates that Intuitive Surgical’s valuation is $589 a share, which is slightly below the current price of ~ $600. Look at our interactive dashboard analysis for Intuitive Surgical’s FY19 Earnings for more details.

(1) Revenues Expected To Be Slightly Lower Than The Consensus Estimates

• Trefis estimates Intuitive Surgical’s 2019 revenues to be $4.3 billion, slightly lower than the consensus estimate of $4.4 billion.

Instruments & Accessories $2.4 Bil (55%)

Systems                                  $1.3 Bil (29%)

Services                                  $0.7 Bil (16%)

—————————————————
TOTAL                                   $4.3 Bil *
Consensus                             $4.4 Bil
Surprise                                 $(0.1) Bil

* Numbers don’t add up due to rounding

• Revenues Will Likely Grow In Mid-Teens To $4.3 Billion In 2019.
• Total revenues have increased at an average annual rate of 16% from $2.7 billion in 2016 to $3.7 billion in 2018, primarily driven by the company’s instruments & Accessories segment. It is expected to see a 16.7% growth in 2019, led by continued growth in its installed base driving revenues across the segments.
• See Intuitive Surgical’s Revenues – How Does ISRG Make Money?
• We provide an interactive, in-depth view of the company’s revenues along with our forecasts.
• Key for 2020: Intuitive Surgical’s revenue will likely grow in low-teens on average over 2019-2020, led by continued growth in the installed base of its robotic surgical products. The growth rate in 2020 is expected to slow when compared to historical years, due to increased competition from other robotic devices manufacturers.

(2) EPS Likely To Be Slightly Below The Consensus Estimates

• Intuitive Surgical’s 2019 adjusted earnings per share (EPS) is expected to be $12.60 per Trefis analysis, slightly below the consensus estimate of $12.64 per share.

Total Revenues                 $4.4 Bil
– Total Expenses               $2.9 Bil
————————————–
Net Income                       $1.5 Bil
÷ Shares Outstanding     118 Mil
————————————–
EPS                                    $12.60
Consensus                        $12.64
Surprise                            $(0.04)

• Adjusted EPS Expected To Increase From $10.99 In 2018 To $12.60 In 2019
• An increase in revenues, partly offset by slight decline in margins, will drive EPS growth.
• As we forecast Intuitive Surgical’s revenues to grow 16.7%, and expenses to grow 18.0%, this will result in a 70 bps decline in the company’s adjusted net income margin figure from 35.0% in 2018 to 34.3% in 2019, as detailed in the dashboard.
• See Intuitive Surgical Expenses – How Does ISRG Spend Its Money?
• We provide an interactive, in-depth view of the company’s expenses, and earnings margins.
• Key for 2020: We believe that revenue will continue to grow in low-teens, while expenses could also grow at a marginally higher pace, resulting in the net income margin figure to decline to 34.5%. We currently forecast $14.00 EPS on an adjusted basis for 2020.

(3) Stock Price Estimate ~ 2% Below The Market Price

• Trefis’ forecast for Intuitive Surgical’s full year 2019 earnings and P/E multiple are slightly below the market expectations, working out to a fair value of $589 for Intuitive Surgical’s stock, which is roughly 2% lower than the current market price of around $600.
• A Trailing P/E Multiple of 46.7x Looks Appropriate For Intuitive Surgical’s Stock, Which Is Slightly Lower Than The Current Implied P/E Multiple of 47.5x
• We use our full cash flow model for Intuitive Surgical to arrive at a P/E multiple of 46.7x for a price estimate of $589.
• Note: P/E Multiples are based on Share Price at the end of the year, and reported (or expected) Adjusted Earnings for the full year.

See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams | Product, R&D, and Marketing Teams