Intuitive Surgical (NASDAQ:ISRG), a fast growing robotic surgical platform company, is scheduled to report its Q4 2021 results on Thursday, January 20. We expect Intuitive Surgical to likely report revenue and earnings slightly above the consensus estimates.
With the rise of the Omicron and Covid-19 cases in the U.S. since December, it is likely that Intuitive Surgical’s sales in certain geographies were adversely impacted. Just like the previous waves, a higher number of cases can overwhelm the healthcare services in certain geographies, resulting in postponement of elective surgeries, and obstruct the revenue growth seen over the recent quarters.
That said, our forecast indicates that Intuitive Surgical’s valuation is around $360 per share, which is 17% above the current market price of $307, implying that ISRG stock has some room for growth, in our view. Our interactive dashboard analysis on Intuitive Surgical Pre-Earnings has additional details.
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(1) Revenues expected to be above the consensus estimate
Trefis estimates Intuitive Surgical’s Q4 2021 revenues to be around $1.53 billion, slightly above the $1.52 billion consensus estimate. The ongoing vaccination programs and gradual opening up of economies has resulted in an increase in procedures volume in 2021, and this should augur well for Intuitive Surgical’s top line growth, when compared to the prior year quarter.
However, the recent surge in Covid-19 cases due to the spread of more contagious variants may adversely impact the overall revenue growth for the company in the near term. da Vinci procedure volume grew 20% in Q3 2021, driving total sales 30% higher to $1.40 billion.
Intuitive Surgical expects $1.55 billion sales in Q4 and 19% growth in procedure volume, as per the preliminary results. Sales growth reflect higher instruments & accessories sales, as well as an increase in system placements. Intuitive Surgical placed 385 systems in Q4, compared to 326 systems in the prior year quarter. Our dashboard on Intuitive Surgical Revenues offers more details on the company’s segments.
2) EPS likely to be ahead of consensus estimates
Intuitive Surgical’s Q4 2021 adjusted earnings per share (EPS) is expected to be $1.32 per Trefis analysis, slightly above the consensus estimate of $1.28. Intuitive Surgical’s adjusted net income of $435 million in Q3 2021 reflected a good 30% rise from its $334 million figure in the prior-year quarter.
The rise in earnings was driven by higher revenues and margin expansion. We believe that margins will remain strong going forward, as the procedure volume increases. However, the inflationary pressure may impact the margins in the near term. For the full-year 2022, we expect the adjusted EPS to be higher at $5.70 compared to $3.38 in 2020 and an estimated $5.00 in 2021.
(3) Stock price estimate more than 15% above the current market price
We estimate Intuitive Surgical’s Valuation to be around $361 per share which is 17% above the current market price. This represents a P/E multiple of 72x and our EPS estimate of $5.00 for the company in 2021. 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: 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 see more gains going forward, the Covid-19 crisis 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 Intuitive Surgical vs Logitech.
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|S&P 500 Return||-2%||-2%||108%|
|Trefis MS Portfolio Return||-7%||-7%||264%|
 Month-to-date and year-to-date as of 1/18/2022
 Cumulative total returns since the end of 2016