Intuitive Surgical (NASDAQ: ISRG), a fast-growing robotic surgical platform company, is scheduled to report its Q1 2022 results on Thursday, April 21. We expect Intuitive Surgical to likely report revenue and earnings in-line with the consensus estimates. With the rise of the Omicron and Covid-19 cases in the U.S. in Q1, it is likely that Intuitive Surgical’s sales in certain geographies were adversely impacted. Like the previous waves, a higher number of cases can overwhelm the healthcare services in certain geographies, resulting in the postponement of elective surgeries, obstructing the revenue growth seen over the recent quarters. That said, our forecast indicates that ISRG stock is currently undervalued, as discussed below. Our interactive dashboard analysis on Intuitive Surgical Earnings Preview has additional details.
(1) Revenues expected to be in line with the consensus estimates
- Trefis estimates Intuitive Surgical’s Q1 2022 revenues to be around $1.4 billion, aligning with the consensus estimate.
- The surge in Covid-19 cases due to the spread of Omicron in Q1 may adversely impact the overall revenue growth for the company.
- That said, now that that wave has subsided, the company will likely see better revenue growth over the coming quarters.
- Looking at Q4 2021, the company saw its sales grow 17% y-o-y to $1.6 billion. This growth was led by a 12% y-o-y increase in the installed base to 6,730 systems in Q4.
- Our dashboard on Intuitive Surgical Revenues has more details.
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(2) EPS likely to align with the consensus estimates
- Intuitive Surgical’s Q1 2022 adjusted earnings per share (EPS) is expected to be $1.08 per Trefis analysis, in line with the consensus estimate.
- The company’s adjusted net income of $477 million in Q4 2021 reflected a 10% rise from its $434 million figure in the prior-year quarter, as the sales growth was partly offset by operating margin contraction.
- The company’s operating margins contracted over 200 bps y-o-y to 29% in Q4.
- Our dashboard on Intuitive Surgical’s Operating Income has more details.
- For the full-year 2022, we expect the adjusted EPS to be higher at $5.00 compared to EPS of $4.90 in 2021.
(3) ISRG stock looks undervalued
- We estimate Intuitive Surgical’s Valuation to be around $345 per share, which is 25% above the current market price of $276.
- This represents a forward P/E multiple of 69x for the company based on our 2022 EPS forecast of $5.00.
- Investors have assigned a high trading multiple for ISRG stock, given the strong revenue and earnings growth over the past years.
- 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
Furthermore, 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 Medtronic vs. Ferro.
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