I wrote a post about this before but it was deleted becuase I included a link to an article about the R&D tax credit.
No time to rewrite the whole thing but here's the gist.
The R&D Tax credit for 2012 was not approved until Jan 2013 but it was approved retroactively. ISRG has been setting aside money towards taxes that are now significantly lower due to the tax credit. In other words, in light of the retroactive tax credit, ISRG has been understating EPS throught the first 3 qtrs of 2012. Now they get to recoup all of that set aside money in Q4. This combined with the fact that Q4 is traditionally their strongest qtr should make for some very healthy EPS numbers
I expect Japan to be good but not to carry the qtr. For now sales to Japan are great but will be a MINOR drag on GP% and ASP because they are not able to sell the Si into Japan yet AND they are making these sales though a distributor
Fish, am I correct in my understanding that they did not include the 2012 R&D tax credit in Q4 results, but they will take the 2012 credit in Q1 2013, so we will see that benefit during the next CC? Thanks!
Tsk Tsk tsk You are trying to put Facts and Logic on this MB Wont work. these paranoids and "singlenoids" (tee hee) are as dumb as they come. If a company had an IPO saying it had developed SQUARE BALLOONS these monekys would be chasing their tails to get in
Good point, bu they also ramped up hiring which will add to operating expenses. My concern is that they don't foresee the tax as a negative going forward. Procedure growth should have a good forecast. I see us at 540 pretty soon.
I'm not certain about this but I think GAAP requires them to act as though the tax is a certainty until it is not. Even if that is not required by GAAP their inclination towards conservative accounting should insure that they don't underestimate the impact of the tax going forward.
Two other thoughts. First is that the continuation of the R&D tax credit is likely although it sure would be nice if congress could make it permanent instead of the game of chicken they play with it every year.
The other thought is that last years Q4 enjoyed the same boost from the retro R&D Tax credit so the YoY comparison may not be that dramatic but the bottom line results should be.
Re: hiring. They have been hiring aggressively for quite a while, with a bit of easing from time to time. This is a drain on current EPS. Having said that, this indicates that they have confidence in future growth AND they have a pretty good track record of growing their workforce efficiently.