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Can Instruments Drive Intuitive Surgical (ISRG) Q2 Earnings?

Zacks Equity Research

Intuitive Surgical, Inc. ISRG is slated to release its second-quarter 2019 results soon, after market close. The company expects steady growth in the Instruments and Accessories segment in the quarter to be reported. Revenues from other segments are likely to bolster the quarterly results.

Notably, the company has outpaced the Zacks Consensus Estimate in two of the trailing four quarters, the average beat being 3.44%.

Which Way Are Estimates Treading?

The Zacks Consensus Estimate for second-quarter revenues is pinned at $1.03 billion, indicating 12.8% growth from the year-earlier quarter's reported figure. The same for earnings is pegged at $2.84, implying a 2.9% increase from the prior-year quarter's reported number.

Intuitive Surgical, Inc. Price and EPS Surprise

Intuitive Surgical, Inc. Price and EPS Surprise

Intuitive Surgical, Inc. price-eps-surprise | Intuitive Surgical, Inc. Quote

Let’s delve deeper.

Instruments & Accessories — A Key Catalyst

The Instruments and Accessories segment is expected to see a solid second quarter. Not to forget, the segment (contributing 56.7% to total revenues) performed impressively in the last reported quarter as well, registering 20% growth year over year.

Markedly, the flagship — da Vinci surgical system — continues to be a revenue driver for the segment. In fact, the unit’s 60-millimeter stapler has been launched recently and is being used in abdominal surgeries. Intuitive Surgical’s second-generation 45-millimeter stapler has also received 510(k) clearance in recent times, expanding the customer base for the segment’s offerings. Additionally, a third-generation vessel sealer has been launched that is likely to benefit the company in the second quarter.

Reflective of these, the Zacks Consensus Estimate for Instruments & Accessories’ second-quarter revenues is pegged at $570 million, suggesting 19.7% growth from the year-ago quarter's reported figure.

Other Factors at Play

Revenues from other two segments — Systems and Services — are also expected to boost second-quarter results on steady progress in the imaging and reality programs.

In the last reported quarter, Systems contributed 25.4% to net sales while Services accounted for 17.9%.

For the quarter to be reported, the Zacks Consensus Estimate for Services stands at $175 million, indicating 12.2% improvement from the year-earlier quarter's reported figure. The same for Systems is pinned at $275 million, implying a mere decline by 0.7% from the year-ago quarter’s reported number.

These apart, Intuitive Surgical is focusing on delivering insights to customers in its cloud computing and informatics efforts. In fact, the company recently received the FDA clearance for its Auris augmented reality product, which is expected to be clinically used for the first time in 2019.

Management at Intuitive Surgical sees more consistent and higher investments in this space in the near term.

Meanwhile, cutthroat competition in the MedTech space remains a headwind as it might weigh on the company’s margins, which have been contracting over the last couple of quarters.

Earnings Whispers

According to the Zacks model, a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for an earnings beat. However, this is not the case here as you will see below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Intuitive Surgical has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Intuitive Surgical carries a Zacks Rank #3.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revision.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

AmerisourceBergen ABC has an Earnings ESP of +1.14% and a Zacks Rank #2.

DENTSPLY SIRONA XRAY has an Earnings ESP of +6.95% and a Zacks Rank #2.

McKesson Corporation MCK has an Earnings ESP of +2.20% and a Zacks Rank #3.

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