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Intuitive Surgical's 3Q16 Earnings: What Investors Should Know

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Intuitive Surgical's 3Q16 Earnings: What Investors Should Know PART 1 OF 3

Intuitive Surgical Reports Earnings Surprise in 3Q16

3Q16 takeaways

On October 18, 2016, Intuitive Surgical (ISRG) released its 3Q16 earnings. After the announcement, Intuitive Surgical’s share price rose ~1% from $709.4 on October 17, 2016. The company’s reported revenue and earnings exceeded analyst estimates by approximately 4.7% and 20.2%, respectively.

Intuitive Surgical Reports Earnings Surprise in 3Q16

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In 3Q16, Intuitive Surgical saw revenues of ~$683 million and registered growth of ~15.8% on a YoY (year-over-year) basis. This exceeded analyst estimates of ~$652 million. The company registered adjusted diluted EPS (earnings per share) of $6.19, exceeding the consensus earnings estimate of $5.15.

Intuitive Surgical registered a stellar performance in 3Q16, driven by strong system placements growth and an increasing adoption of procedures by customers. The company witnessed procedure growth of ~14% on a YoY (year-over-year) basis. Its primary growth drivers include US general surgery, worldwide urology sales, and da Vinci system placements outside the United States.

Growth in Asia

While its growth in the US across mature procedures have started to moderate and its procedure growth in Europe was reported as weak in 3Q16, the company’s growth in Asia continued to witness momentum, with China and South Korea reporting the strongest growth. In 3Q16, around 134 systems were placed, as compared to 117 systems in 3Q15.

Peers Medtronic (MDT), Stryker (SYK), and Becton Dickinson (BDX) expect to register revenues of ~$7.5 billion, ~$2.8 billion, and ~$3.2 billion, respectively, in their most recent fiscal quarters.

Earnings results

In 3Q16, Intuitive Surgical reported net income of ~$211 million, which represents ~26% YoY growth. Its adjusted diluted EPS grew by around 35.3%, and its gross margin improved to 71.3% of total revenues, as compared to the ~70.3% gross margin it reported in 2Q16.

Notably, investors interested in indirect exposure to Intuitive Surgical can invest in the PowerShares QQQ (QQQ), which has ~0.53% of its total holdings in ISRG.

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