Intuitive Surgical Posts Quarterly Beat; Shares Drop

Intuitive Surgical, Inc. (NASDAQ: ISRG) reported upbeat first-quarter 2022 results, surpassing analysts’ expectations for both earnings and revenues. The company manufactures robotic-assisted products, mainly with the da Vinci surgical system and associated instruments and accessories, to improve clinical outcomes of patients through minimally invasive surgery. 

Despite the beat, shares of the company are currently down more than 12% on the day. Importantly, the quarterly gross margin was impacted by elevated logistics costs and manufacturing inefficiencies. 

Results in Detail 

Intuitive Surgical reported adjusted earnings of $1.13 per share, which comfortably beat the consensus estimate of $1.08 per share. It recorded adjusted earnings of $1.17 per share in the first quarter of 2021. Adjusted net income stood at $413 million, down 3.3%. 

Additionally, revenues came in at $1.49 billion, topping analysts’ expectations of $1.43 billion, increasing 15% year-over-year. Growth in da Vinci procedure volume and system placements drove the results. 

On a segment basis, instruments and accessories revenue grew 15% year-over-year to $810 million, while systems revenue came in at $428 million, up 16%. Remarkably, the company placed 311 da Vinci Surgical Systems in the reported quarter, up from 298 systems placed in the prior-year quarter. 

Globally, da Vinci procedures rose 19% year-over-year despite being impacted by the resurgence of COVID-19 during the quarter. 

As of March 31, 2022, the da Vinci Surgical System installed base increased to 6,920 systems, up 13% from 6,142 as of March 31, 2021. 

Adjusted gross margin was 69.8%, down from 71.8% in the prior-year quarter, while total operating expenses stood at $601.6 million, up 23.8%. 

During Q1 2022, the company spent $107 million to repurchase 398,000 shares at an average price of $268 per share. 

Official Comments 

In response to the reported results, Intuitive Surgical CEO Gary Guthart said, “Customer demand for our products was healthy in the first quarter despite a challenging global environment. We remain focused on meeting that demand with high-quality products and services while advancing our innovation programs.” 

Outlook 

Intuitive Surgical expects procedure growth of 12% to 16% in 2022, including the impact of uncertainty related to the pandemic. 

Additionally, the adjusted gross profit margin is likely in the range of 69% to 70.5% of net revenue, while adjusted operating expense growth is anticipated to land between 23% and 27%. Capital expenditures for 2022 are expected to be in the range of $700 million to $900 million. 

Wall Street’s Take 

Following the results, BTIG analyst Ryan Zimmerman maintained a Buy rating on Intuitive Surgical but reduced the price target to $355 (37.3% upside potential) from $360. 

Zimmerman said, “We believe the company is well-positioned to continue growing procedures, and we view shares as attractive as recovery ensues.” 

The rest of the Street is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 10 Buys, five Holds, and no Sell ratings. The average Intuitive Surgical price target of $335.38 implies 29.7% upside potential. Shares have dropped 1% over the past year. 

Bloggers Weigh In 

Bloggers seem to like ISRG stock. TipRanks data shows that financial blogger opinions are 73% Bullish on ISRG, slightly higher than the sector average. 

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