Intuitive Surgical (ISRG) reported first quarter earnings per share of $3.50, surpassing the Zacks Consensus Estimate of $3.15, while beating the corresponding year-ago earnings per share of $2.59. Profit increased 37.8% year over year to $143.5 million.
The stock moved up 5.95% to $577.99 in after hours trading on April 17.
Intuitive Surgical reported sales of $495.2 million for the first quarter, up 28% year over year. Revenues beat the Zacks Consensus Estimate of $466 million. Recurring revenues moved up 31% year over year and constituted 58% of sales.
On a segment-wise basis, the company reported revenues from instruments and accessories of $208 million, up 32% year over year, in the first quarter. The growth was driven by a 29% year-over-year increase in da Vinci surgical procedures. The uptick in procedure count mainly emanated from overseas urologic cases as well as domestic gynecologic procedures and general surgery categories.
Revenues from sales of systems were $207 million, up 24% year over year. The increase in systems revenue was due to higher sales of 140 da Vinci Systems compared with 120 systems in the year-ago quarter. Service revenue was $81 million, up 27% year over year, primarily due to rise in the installed base of da Vinci Surgical systems.
Intuitive Surgical recorded gross margin of 72% in the reported quarter, approximately flat with the year-ago quarter. The company reported operating expenses of about $162.6 million in the quarter, up 24.6% year over year. Of the two components, selling, general and administrative expense increased 25.3% while research and development expenditure was up 22.3%.
Operating income amounted to $193.3 million, or about 39% of revenue, in the reported quarter compared with $148.3 million, or 38% of revenue, in the prior-year quarter.
Balance Sheet
Intuitive Surgical exited the first quarter with cash, cash equivalents and investments of $2,371 million, up 69.9% year over year. It remains a zero debt company.
Outlook
Intuitive Surgical revised its forecast for procedure growth to a higher range of 25% to 27% (from 24% to 26% earlier) for fiscal 2012. Revenues are forecast to grow in a band of 19% to 21% (from 17% to 19% previously). Operating income continues to be projected at about 39% to 40% of net sales.
We expect a number of procedures that are currently completed either in an open surgical manner or with laparoscopy to be eventually replaced by da Vinci surgery, as robotic surgery becomes the standard of care in many instances. The company enjoys a virtual monopoly in robotic surgery with little competition.
Intuitive’s recurring revenue stream continues to be robust and provides a shield against cyclicality of revenues, arising from the sale of discretionary capital equipment to hospitals. However, we believe that until the global economy fully recovers, the stock may come under pressure as investors ponder whether lingering macro economic uncertainty weakens hospitals’ commitment to buy high-cost robotic systems.
The pace of adoption of robotic surgery may therefore be lumpy and growth in usage requires acceptance from patients and training to medical practitioners. Intuitive competes with Accuray Incorporated (ARAY) in certain niches.
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