Will Intuitive Surgical (ISRG) Disappoint In Q4 Earnings?

Intuitive Surgical Inc.’s (NASDAQ:ISRG) fourth-quarter 2017 results, scheduled for release on Jan 25, are expected to show steady growth in instruments and accessories revenues — one of the major revenue components. While this could majorly drive earnings in the quarter under review, an expected improvement in revenues at all other segments should help the company generate solid results this season.

The Zacks Consensus Estimate for instrument and accessories revenues is pegged at $442 million for the fourth quarter. This reflects an increase of 19.5% from the year-ago quarter.

It is important to note that Intuitive Surgical delivered positive earnings surprises in the past four quarters, the average being 12.8%. Like the prior quarter, strong growth in U.S. general surgery and worldwide urology, are said to be the supposed growth drivers.

Upbeat Preliminary Results for Q4

Intuitive Surgical has recently announced better-than-expected preliminary net sales results for fourth-quarter 2017.

The company expects net sales for fourth-quarter 2017 to be approximately $892 million, up 18% on a year-over-year basis.

da Vinci procedures increased roughly by 17% in the fourth-quarter of 2017.

Preliminary fourth-quarter 2017 revenues of the instrument and accessories segment increased approximately 18% to $457 million on a year-over-year basis (read more: Intuitive Surgical Upbeat on Q4 & 2017 Sales Results)

Other Factors at Play

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 catalyst for the fourth quarter. The Zacks Consensus Estimate for revenues in the fourth quarter is $847.20 million, which grew 11.9% year over year.

Further, the Zacks Consensus Estimate for earnings in the fourth quarter is pegged at $2.25, which grew 10.8% year over year. Below are the other factors that might influence Intuitive Surgical’s quarterly results this earnings season.

Solid Procedure Trends: Solid revenue performance of Product Instruments and Accessories is likely to boost the company’s top line. Added to this, solid growth in da Vinci procedures is expected to lend Intuitive Surgical a competitive edge in the broader general surgery market.
In December 2017, the company filed form 510(k) with the FDA for the da Vinci Single Port Surgical System for certain urology procedures.
Further, Intuitive Surgical's procedure trends are expected to be solid globally, courtesy of stellar performances in the general surgery and global urology segments.

da Vinci & Service Units Hold Promise: Solid growth in the company’s da Vinci and service segment is expected to drive the company’s fourth-quarter earnings. In fact, the Zacks Consensus Estimate for da Vinci system unit segment is pegged at $188 million, up 11.2% compared to the prior quarter. The increase is likely to stem from solid growth in da Vinci procedures. Coming to revenues at the services segment, the Zacks Consensus Estimate is $151 million, up 12.7% on a year-over-year basis.

Growth in System’s Installed Base: Per the Zacks Consensus Estimate, the company’s total systems installed base is expected to be 4400 units, driven by higher system placements and operating lease revenues. It is important to note that Intuitive Surgical generated approximately $7 million in revenues from operating leases last quarter, compared with $4 million in the third quarter and approximately $6 million in the second quarter of 2016.

Here is what our quantitative model predicts:

Although Intuitive Surgical carries a Zacks Rank #2 (Buy) it does not have a positive Earnings ESP for increasing the odds of an earnings beat.

Zacks ESP: The Earnings ESP for Intuitive Surgical is -0.73%, as the Most Accurate estimate is $2.23 and the Zacks Consensus Estimates is pegged at $2.25. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Intuitive Surgical increases the predictive power of ESP. However, we also need a positive ESP to be confident of earnings beat.

Stocks Worth a Look

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

Centene Corporation (NYSE:CNC) has an Earnings ESP of +0.25% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank Stocks Here.

Eiger BioPharmaceuticals Inc. (NASDAQ:EIGR) has an Earnings ESP of +0.73% and a Zacks Rank #2.

Blueprint Medicines Corporation (NASDAQ:BPMC) has an Earnings ESP of +2.44% and a Zacks Rank #3 (Hold).

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