Will Intuitive Surgical Stock Rise Post Q2 Results?

by Trefis Team
Intuitive Surgical
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Intuitive Surgical (NASDAQ:ISRG), a fast growing robotic surgical platform company, is scheduled to report its Q2 2021 results on Tuesday, July 20. We expect Intuitive Surgical to likely beat the revenue and earnings expectations, driven by continued rebound in total procedure volume. We expect the company to navigate well based on these trends over the latest quarter. That said, our forecast indicates that Intuitive Surgical’s valuation is around $910 per share, which is 5% below the current market price of $954, implying that ISRG stock is richly valued currently, in our view. Our interactive dashboard analysis on Intuitive Surgical Pre-Earnings has additional details.

(1) Revenues expected to beat the consensus estimates

Trefis estimates Intuitive Surgical’s Q2 2021 revenues to be around $1.30 Bil, slightly ahead of the $1.26 Bil consensus estimate. While a deferment of elective surgeries last year impacted the overall revenue growth in Q2 2020, the ongoing vaccination programs and gradual opening up of economies has resulted in an increase in procedures volume over the recent months, and this should augur well for Intuitive Surgical’s top line growth. Procedure volume grew in high-teens in Q1 2021, driving total sales 18% higher to $1.3 billion. Sales growth reflect higher instruments & accessories sales, as well as an increase in system placements. Intuitive Surgical placed 298 systems last quarter, compared to 237 systems in the prior year quarter. Our dashboard on Intuitive Surgical Revenues offers more details on the company’s segments.

2) EPS also likely to be ahead of consensus estimates

Intuitive Surgical’s Q2 2021 adjusted earnings per share (EPS) is expected to be $3.15 per Trefis analysis, nearly 3% above the consensus estimate of $3.06. Intuitive Surgical’s adjusted net income of $427 million in Q1 2021 reflected a solid 32% rise from its $323 million figure in the prior-year quarter. The rise in earnings was higher than revenues due to a 360 bps expansion of net margins, due to lower SG&A expenses as well as lower taxes. We believe that margins will remain strong going forward, as the procedure volume increases. For the full-year 2021, we expect the adjusted EPS to be higher at $13.50 compared to $10.14 in 2020.

(3) Stock price estimate lower than the current market price

Going by our Intuitive Surgical’s Valuation, with an EPS estimate of around $13.50 and a P/E multiple of around 67x in 2021, this translates into a price of $910, which is 5% below the current market price of around $954. Investors have assigned a high trading multiple for ISRG stock, given the strong revenue and earnings growth over the past years, and this trend is expected to continue going forward, as well. Note that Intuitive Surgical generates recurring revenues from every system placed, driven by the instruments and accessories sales, as well as services. Although an earnings beat may result in ISRG stock seeing even higher levels, going by valuation, we believe that it will be prudent for investors to wait for a dip in ISRG stock to buy for better gains. Our note – Intuitive Surgical Stock Is Richly Valued At $900 Levels – has more details.

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

While ISRG stock may not see much gains going forward, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Pfizer vs Merck.

See all Trefis Price Estimates and Download Trefis Data here

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