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What to Expect from Intuitive Surgical’s 4Q16 Earnings

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Analyst estimates

ISRG has exceeded analysts’ earnings estimates for the last few quarters. Any deviation of the actual results from analysts’ estimates usually impacts the company’s stock.

In 3Q16, Intuitive Surgical’s earnings exceeded analysts’ estimates by more than 20.0%. The stock rose about 1.0% on the day of the announcement.

Intuitive Surgical (ISRG) accounts for ~4.2% of the iShares US Medical Devices (IHI).

In 3Q16, Intuitive Surgical exceeded analysts’ adjusted diluted EPS (earnings per share) estimate of $5.15 as well as their revenue estimate of ~$652.0 million. According to analysts, the company’s 4Q16 EPS is expected to be ~$5.98.

Intuitive Surgical expects about a 15.0% procedure growth in fiscal 2016, which is expected to boost the company’s earnings.

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Profit margin estimates

For 4Q16, Wall Street analysts project that Intuitive Surgical’s net profit margin should rise to $203.0 million. The estimate represents ~27.0% of the total revenue, compared to ~31.0% in the previous quarter.

On a YoY (year-over-year) basis, the company’s 4Q16 net profit margin is expected to rise ~26.0%. Its gross profit margin for the quarter is expected to be around 70.7%. The company expects to report lower margins in 4Q16 compared to 3Q16 due to its product mix and some one-time tailwinds in 3Q16.

Intuitive Surgical expects to generate a gross profit margin of 70.0%–71.0% in 2016. In the most recent quarter, peers Stryker (SYK), TransEnterix (TRXC), and Medtronic (MDT) are expected to report EPS growth of 19.5%, 20.0%, and 46.2%, respectively.

In the next part, let’s look at ISRG’s capital allocation strategy.

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