North America

Earnings Preview: Intuitive Surgical Q4 2016 (ISRG)

By: Craig Bowles

Overview

Intuitive Surgical, Inc. (ISRG) is slated to report 4Q 2016 earnings after the bell on Tuesday, January 24th. 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 $5.99 (range $5.67 to $6.27). (Source: Yahoo! Finance) Consensus was $6.11 three months ago.
  • Revenues: Guidance on January 11th was $757 mln. Analyst consensus expectations are for a 9.3% y/y increase to $739.65 mln (range $720.1 mln to $766.0 mln).
  • Intuitive Surgical’s Price/Earnings of 35.8 compares to a five-year average of 35.2; P/Book of 4.6 compares to a five-year average of 5.4; P/Sales of 9.9 compares to a five-year average of 9.1; P/Cash Flow of 25.9 compares to a five-year average of 26.4.
  • Analysts view ISRG with 12 Buy, 7 Hold, and 1 Sell ratings. (source: MarketBeat.com)
  • Insiders sold 26,259 shares in the last three months and 188,182 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 4.60%. Options are pricing in an implied move of 4.71% off earnings.

Recent News

  • 01/13: Intuitive Surgical’s CEO Gary Guthart gave an impressive talk at the J.P. Morgan Healthcare Conference but challenges last year in parts of Europe could persist into 2017 and warned that macro healthcare system changes are a potential negative, according to a post on fool.com.
  • 01/11: Intuitive Surgical’s preliminary fourth quarter and full year 2016 financial results, according to the ISRG press release.
  • 01/04: Evercore ISI downgraded Intuitive Surgical to Hold from Buy citing multiple macro questions ranging from ACA repeal to border tax reform to deductibility of interest expense, according to a post on StreetInsider.com.
  • 12/28: Trefis Team expected 760 units. (Intuitive Surgical shipped 537 da Vinci Surgical Systems in 2016, compared with 492 systems in 2015.), according to a post on Forbes.com.
  • 11/15: Hernia operations have been the biggest driver in growth of “U.S. general surgery” operations for Intuitive Surgical with the average hospital stay was 2.5 days shorter for those who underwent robotic surgeries, according to a post on Fool.com.
  • 10/19: CFRA Research remains positive on Intuitive Surgical but sees soft overseas Q4 sales in China and Brazil and more instrument placements under operating leases with sale, according to a post on Barron’s.com.

Technical Review

Intuitive Surgical shares made another all-time high of $727.25 in the second half of 2016 before testing below the 200-day moving average. Another repeat of 4.5 years between highs would be October 2017 following the previous 2007 and 2012 peaks. Point and figure technicians increased their bullish price objective to $809 from $754. (Chart courtesy of StockCharts.com)

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Summary

Intuitive Surgical is expected to eventually have to deal with competition but not before 2018. Insider selling remained relatively tame as the company tripled their stock buyback at the end of 2016.  The company has beaten analyst consensus by an average of 66c the last four quarters. Estimize consensus for Non-GAAP EPS of $6.36 on revenue of $748.19 mln compares to analyst consensus of $5.13 on revenue of $648.45 mln. Revenue guidance on January 11th was for $757 mln, or $17 mln above what analysts had been forecasting.

 

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