We recently upgraded Intuitive Surgical, Inc. (ISRG) to ‘Outperform’ as a result of its strong fourth quarter and fiscal 2009 results. The stock was assigned a target price of $400 based on a P/E of 52.0x our fiscal 2010 EPS estimate of $7.69. 

Intuitive reported fourth quarter earnings per share of $1.95, beating the Zacks Consensus Estimate of $1.71 and the year-ago earnings of $1.27. For fiscal 2009, earnings per share came in at $6.23, compared to the Zacks Consensus Estimate of $5.72 and the year-ago result of $5.12. 

Total sales in the fourth quarter increased 40% year-over-year to $323.0 million. Growth was driven by continued robotic procedure adoption, thereby leading to higher sales of Intuitive’s da Vinci Surgical System. 

Instruments and accessories revenue increased 39% year-over-year to $113.3 million. Systems revenue increased 42% year-over-year to $162.0 million. Services sales increased 32% year-over-year to $47.8 million. 

Gross margin during the fourth quarter increased 80 basis points (bps) year-over-year to 72.2%. The growth can be attributed to increased system average selling pieces (ASPs). ASP per system was $1.41 million, compared to $1.32 million in the year-ago quarter. Operating and net margins increased 400 bps and 210 bps year-over-year to 39.7% and 24.0%, respectively. 

Total revenues in fiscal 2009 increased 20% year-over-year to $1,052.2 million. Growth was witnessed across all business segments. 

Intuitive Surgical designs, manufactures and markets the da Vinci Surgical System, an advanced robot-assisted surgical system used in urologic, gynecologic, cardiothoracic and general surgeries. This represents a new generation in surgery.
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