In the current environment, you can post beats on the important metrics in a quarterly report and even provide strong guidance, yet if one element does not meet the market’s expectations, a stock will pay for the transgression. Such was the fate that befell Intuitive Surgical (ISRG) following the medical device maker’s Q1 earnings.
The company delivered revenue of $1.49 billion, amounting to a 15% year-over-year increase and coming in above the $1.426 billion consensus estimate. The growth was driven by outperformance of the most important metric – worldwide medical procedures performed by the company’s da Vinci robotic surgical system. These increased by 19% from the same period last year, with the U.S. showing 16% growth and the international markets displaying a 25% uptick. Consensus had overall growth of 11%. The company placed 311 da Vinci systems in the quarter, a YoY increase of 4% as the total installed base reached 6,920. As for the bottom-line, adj. EPS clocked in at $1.13, beating the Street’s call by $0.05.
Looking ahead, the company guided for procedure growth of 12%-16%, up from the prior expectation of 11%-15% growth. As such, you would think investors would applaud the overall performance, but not so. Shares sold off by 14% in the subsequent session on what BTIG analyst Ryan Zimmerman calls the “bearish commentary on the capital spending environment at US hospitals and supply headwinds weigh on demand.”
“ISRG continues to ramp up operating expenses and investors do not want to see EPS come down but ISRG’s long-term strategy remains unchanged,” said the 5-star analyst, who still backs ISRG’s game plan. “We believe the company is well-positioned to continue growing procedures, and we view shares as attractive as recovery ensues.”
Zimmerman sticks with a Buy rating although the price target is tweaked down from $360 to $355. Nevertheless, there’s still room for 39% growth over the coming year. (To watch Zimmerman’s track record, click here)
Mirroring Zimmerman’s upbeat take, Raymond James’ Jayson Bedford remains on board too. While the analyst acknowledges investors were most probably expecting a “cleaner ‘beat and raise’, and effectively got a ‘beat,’” he sees no reason to turn bearish.
“Big picture, there is no change to our constructive stance on ISRG,“ the 5-star analyst reassured, “and we continue to view ISRG as the leader in one of the stronger mega-trends in the Med Tech space. We expect our estimates will prove conservative and believe the runway for growth is significant.”
That bullish commentary underpins Bedford’s Outperform (i.e., Buy) rating, although there’s also a slight price target reduction; the figure drops from $334 to $330, implying one-year share gains of 29%. (To watch Bedford’s track record, click here)
What does the rest of the Street have in mind for ISRG stock? Based on 11 Buys vs. 5 Holds and 1 Sell, the stock claims a Moderate Buy consensus rating. The average target clocks in at $327.63, making room for 12-month returns of ~28%. (See ISRG stock forecast on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
