What’s Intuitive Surgical’s Capital Allocation Strategy?



Intuitive Surgical’s share repurchase authorization program

On December 13, 2016, Intuitive Surgical increased its authorized share repurchase program from $1.0 billion to $3.0 billion. The company, which doesn’t pay dividends, authorized a $1.0 billion share repurchase plan in early 2015. The repurchase program is expected to be funded by cash and investments and could lead to growth in the company’s bottom line.

According to Intuitive Surgical’s December 13, 2016, press release, “The timing and total amount of stock repurchases will depend upon market conditions and may be made from time to time in open market purchases, privately negotiated transactions, accelerated share repurchase programs, issuer self-tender offers or otherwise, as determined by the Company’s management.”

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Intuitive Surgical’s cash flows and capital allocation strategy

According to Marshall L. Mohr, Intuitive Surgical’s chief financial officer, “We are committed to investing our resources to advance our surgical robotics business. We also seek to return excess cash to our shareholders responsibly, and this authorization gives us the flexibility to do so.”

Intuitive Surgical has grown significantly over the last few years, riding high on the success of the company’s da Vinci Xi System. The company’s growth in the area of hernia operations is also driving growth and is expected to be its major growth area in the near future. For more on hernia opportunities for Intuitive Surgical, read Hernia Repair Should Drive Significant Growth for Intuitive Surgical.

ISRG’s cash, cash equivalents, and investments were about $ 4.6 billion as of September 30, 2016. Historically, Intuitive Surgical has largely reinvested its capital in its research and development programs and inorganic growth.

Some of the recent entrants that have intensified competition in the robotics surgery market pose potential competition to Intuitive Surgical. These companies include Medtronic (MDT), Stryker (SYK), and TransEnterix (TRXC). For more on this, read Competition in the Robotics Surgical Space Impacts Intuitive Surgical.

If you want to hold ISRG, you can invest in the PowerShares QQQ ETF (QQQ), which holds approximately 0.44% in ISRG.

Next, let’s look at ISRG’s recent stock performance.


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