We recently upgraded Intuitive Surgical, Inc. (ISRG) to ‘Outperform’ with a target price of $409 based on a P/E of roughly 48.1x our fiscal 2010 EPS estimate of $8.51. The company reported an outstanding first quarter in fiscal 2010. Earnings per share were $2.12, handily beating the Zacks Consensus Estimate of $1.66 and the year-ago earnings of $1.02.
Total sales in the first quarter increased 74.4% year over year to $328.6 million. Growth was primarily attributed to continued robotic procedure adoption, thereby leading to higher sales of Intuitive’s da Vinci Surgical System.
Instruments and accessories revenue increased 54.1% year over year to $122.7 million. Systems revenue increased 123.5% year over year to $155.3 million. Services sales increased 28.8% year over year to $50.6 million.
Intuitive ended the first quarter with a gross margin of 73.2%, an increase of 490 basis points (bps) year over year. The higher gross margin primarily stemmed from increased system average selling prices (ASPs). ASP per system was $1.45 million, compared to $1.33 million in the year-ago quarter.
Operating margin increased 15.6% year over year to 39.5%. Higher gross and operating margin led to an 11.1% year-over-year expansion in net margin to 26.0%.
Intuitive Surgical designs, manufactures and markets the da Vinci Surgical System, an advanced robotics-based surgical system used in urologic, gynecologic, cardiothoracic and general surgeries. This represents a new generation in surgery.
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