North America

Earnings Preview: Intuitive Surgical Q1 2017 (ISRG)

By: Craig Bowles

Overview

Intuitive Surgical, Inc. (ISRG) is slated to report 1Q 2017 earnings after the bell on Tuesday, April 18th. The earnings release is expected at approximately 4:05 p.m. ET followed at 4:30 p.m. with a webcast presentation available through Intuitive Surgical Investor Relations. The company designs, manufactures, and markets da Vinci surgical systems, and related instruments and accessories in the United States, Europe, and Asia.

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Outliers & Strategy

Key measures:

  • Non-GAAP Earnings Per Share (EPS): Analyst consensus is $4.93 (range $4.62 to $5.52). (Source: Yahoo! Finance) Consensus was $5.28 three months ago.
  • Revenues: Analyst consensus expectations are for a 12.7% y/y increase to $670.18 mln (range $645.0 mln to $720.1 mln).
  • Intuitive Surgical’s Price/Earnings of 40.8 compares to a five-year average of 35.2; P/Book of 4.9 compares to a five-year average of 5.4; P/Sales of 11.1 compares to a five-year average of 9.1; P/Cash Flow of 28.8 compares to a five-year average of 26.4.
  • Analysts view ISRG with 11 Buy, 6 Hold, and 1 Sell ratings. (source: MarketBeat.com)
  • Insiders sold 61,968 shares in the last three months and 187,781 shares in the past year. (source: NASDAQ.com) The stock buyback was increased to $3 bln on December 13th, 2016 compared to 2015 $1 bln, 2014 $1 bln and 2013 $1.5 bln.
  • Intuitive Surgical is an operative surgical robotics company and results can affect other medical instrument companies, such as Accuray (ARAY), Edwards Lifesciences (EW), Delcath Systems (DCTH), Stryker (SYK), RTI Surgical (RTIX) and Medtronic (MDT).
  • Intuitive Surgical shares have a 1-day average price change on earnings of 5.05%. Options are pricing in an implied move of 2.52% off earnings.

Recent News

  • 04/05: Unconfirmed rumors suggest Medtronic is an interested suitor of Intuitive Surgical, according to a post on fly.com.
  • 03/24: Canaccord Genuity reiterated a Buy rating on Intuitive Surgical following checks at the SAGES conference in Houston. On the competitive front, Medtronic looks to be at least a few years out, but seems to be ISRG’s most imminent challenger, according to a post on StreetInsider.com.
  • 03/21: Intuitive Surgical continues to appear built for growth. The company is seeing growing demand in a number of procedures such as hernia repair, colorectal surgeries, and general surgery. Intuitive is also constantly investigating new uses for its machines and expanding its reach into new geographies, according to a post on Fool.com.
  • 02/14: BofAMerrill Lynch maintained a Buy rating on Intuitive Surgical while noting that ISRG trades at about the same FCF yield as MDT (MDT trades at 4.3% FCF yield using last 12 months, ISRG trades at 4.1%) despite a superior growth and return outlook for ISRG, according to a post on StreetInsider.com.
  • 02/07: Intuitive Surgical is increasing R&D spending by over 30% following a 20% increase in 2016, according to a post on Fool.com.

Technical Review

Intuitive Surgical shares made another all-time high of $775.91 after testing the 200-day moving average at the end of 2016. Another repeat of 4.5 years between highs would be October 2017 following the previous 2007 and 2012 peaks. Point and figure technicians show a small balance area at $740. (Chart courtesy of StockCharts.com)

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Summary

Intuitive Surgical is expected to eventually have to deal with competition after April 2018 as licenses begin to get approved in Europe for other vendors. Insider selling remained about average as the company tripled their stock buyback at the end of 2016.  The company has beaten analyst consensus by an average of 47c the last four quarters but the year ago quarter was a 9c beat. Estimize consensus for Non-GAAP EPS of $4.99 on revenue of $664.34 mln compares to analyst consensus of $4.93 on revenue of $670.18 mln.

 

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