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Intuitive Surgical (ISRG) Raises Share Buyback to $3 Billion

Zacks Equity Research

In a bid to return more value to its shareholders, the board of directors of Intuitive Surgical Inc. ISRG increased the authorized amount available under the company's share repurchase program to $3.0 billion. The company expects to fund the repurchase program through cash and investments. As of Sep 30, 2016, the company had approximately $4.6 billion in cash, cash equivalents and investments.

Shares of Intuitive Surgical shed a nominal 0.01%, to close at $635.97 following the news release. However, a glimpse of the recent price movement of the stock reveals a stellar year-to-date return of 16.04%, way better than the Zacks categorized Medical Instrument sub-industry’s return of 1.08% and the S&P 500’s roughly 11.14%.

However, we are optimistic about continued advancements in Intuitive Surgical’s technology platforms, client base and sales pipeline. Also, a long-term expected earnings growth rate of 12.27% and a projected sales growth of 11.85% instill some confidence in its investors.

We believe that the growing adoption of Intuitive Surgical’s da Vinci system among physicians for general surgery, oncology, urology and gynecology procedures is a key growth catalyst. Moreover, increasing procedural volumes outside the U.S. present significant growth opportunities for the company.

Further, the joint venture with Shanghai-based Fosun pharma is considered a prudent move. However, we believe that the positive trends are mostly quarter-specific and that the company has to make efforts to sustain the momentum.

Intuitive Surgical impressed in the third quarter of 2016 with exceptional global procedure growth, solid capital placement, strong product margin and new product launches. Notably, the company reported adjusted earnings of $5.39 per share, crushing the Zacks Consensus Estimate by $1.04.

Zacks Rank & Key Picks

Currently, Intuitive Surgical has a Zacks Rank #2 (Buy).

Other favorably ranked stocks in the broader medical sector include MannKind Corporation MNKD, Sucampo Pharmaceuticals, Inc. SCMP and Vanda Pharmaceuticals, Inc. VNDA. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sucampo’s earnings estimates increased from $1.03 to $1.22 for 2016 and from $1.30 to $1.69 for 2017 over the last 60 days. The company posted a positive surprise in all of the four trailing quarters with an average beat of 35.55%.

Vanda’s loss estimates narrowed from 62 cents to 52 cents for 2016, while its earnings estimates increased from 13 cents to 22 cents for 2017 over the last 60 days. The company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 56.65%. Its share price has surged almost 73% year to date.

MannKind’s estimates narrowed from loss of 24 cents to earnings of 12 cents for 2016 over the last 60 days. For 2017, loss estimates narrowed from 14 cents to 9 cents over this period. The company posted a positive surprise in two of the four trailing quarters with an average beat of 103.33%.

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