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Intuitive Surgical (ISRG) Q1 Earnings, Revenues Lag Estimates

Zacks Equity Research

Intuitive Surgical, Inc. ISRG reported adjusted earnings of $2.61 per share in the first quarter of 2019, which fell short of the Zacks Consensus Estimate of $2.70. Adjusted earnings improved 7% year over year.

The Zacks Rank #4 (Sell) company recorded revenues of $973.7 million which improved 14.9% from the prior-year quarter. However, the figure missed the Zacks Consensus Estimate of $980 million.

Segment Details

Instruments & Accessories

Revenues at the segment came in at $552.3 million, reflecting year-over-year increase of 20%. The improvement primarily reflects increased use of Intuitive Surgical’s advanced instruments.


In the reported quarter, System revenues increased 5.5% year over year to $247.5 million. Per management, Intuitive Surgical placed 235 da Vinci Surgical Systems in the first quarter compared with 185 systems in the year-ago quarter.

Per management, the install base of da Vinci systems expanded 13% on a year-over-year basis to approximately 5,110.


Services revenues came in at $173.9 million, up 13.9% from the year-ago quarter.

Intuitive Surgical, Inc. Price, Consensus and EPS Surprise


Intuitive Surgical, Inc. Price, Consensus and EPS Surprise | Intuitive Surgical, Inc. Quote

International Sales Up

Outside the United States, revenues totaled $282 million, up 3% on a year-over-year basis but down 8% sequentially. The year-over-year improvement can be attributed to a greater proportion of da Vinci X systems and a higher mix of distributor arrangements.

Outside the United States, Intuitive Surgical placed 81 systems in the first quarter compared with 73 in the first quarter of 2018. Of these, 49 were in Europe, 13 in Japan, eight in Brazil and three in China.


Adjusted gross profit in the reported quarter was $692.9 million, up 14.2% year over year. As a percentage of revenues, adjusted gross margin in the quarter was 71.2%, down 40 basis points (bps).

Adjusted operating income totaled $361.5 million, up 4.4% year over year. As a percentage of revenues, adjusted operating margin in the quarter was 37.1%, down 380 bps.

2019 Outlook Impressive

Intuitive Surgical now forecasts 2019 procedure growth in the range of 15% to 17%, compared with the previous 13% to 17%.

Wrapping Up

Intuitive Surgical ended the first quarter on a dull note. However, the flagship da Vinci procedures recorded solid growth in the quarter. In fact, management expects strong procedure growth in 2019. The company looks to accelerate its business in China, following the clearance of da Vinci Xi. Sales outside the United States surged in the quarter. Management is also optimistic about the recent approvals for the Ion endoluminal system, IRIS augmented reality product and the da Vinci SP Surgical System. Meanwhile, the newly-formed Intuitive Foundation is expected to improve patient outcome.

On the flip side, contraction in the gross and operating margin is worrisome. Additionally, the da Vinci system is in the early stages of adoption in some of the markets outside the United States which is likely to impede placements. Intense competition in the global MedTech space is concerning as well.

Key Picks

A few better-ranked stocks in the broader Medical space are Penumbra PEN, Wright Medical WMGI and Masimo Corporation MASI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Penumbra has a long-term earnings growth rate of 20.9%.

Wright Medical’s long-term earnings growth is projected at 11.3%.

Masimo’s long-term earnings are expected to grow 15.6%.

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