Balanced View on Intuitive Surgical - Analyst Blog

On Mar 13, we have updated our research report on Intuitive Surgical Inc. ISRG. Intuitive Surgical continue to see pressure on gynecology surgery, dispute related to some da Vinci procedures and changing capital spending priorities in hospitals due to the implementation of the Affordable Care Act.

However, due to the leading position in robotic surgery, a growing list of emerging procedures, barriers to entry, sizeable cash and no debt, we are maintaining a balanced view on Intuitive Surgical.

Intuitive Surgical reported net earnings of $4.28 per share for the fourth quarter of 2013, beating the Zacks Consensus Estimate of $3.79 and inching up 1% year over year. However, net earnings of $166.2 million went down 4.9% from the fourth quarter of 2012.

Full year adjusted earnings per share (after adjusting for certain discrete tax benefits) came in at $16.73, exceeding the Zacks Consensus Estimate of $16.32 and the 2012 earnings of $15.98 per share by 4.7%.

Revenues in the quarter dipped 5% to $576 million but surpassed the Zacks Consensus Estimate of $551 million. The year-over-year decline was due to pressure on gynecology surgery, dispute related to some da Vinci procedures along with changing capital spending priorities in hospitals due to the implementation of the Affordable Care Act.

Intuitive Surgical faces the risk of adoption of its procedures. Adoption growth takes time, as each procedure needs to gain credibility. Furthermore, broad use of Intuitive Surgical's products requires training of surgical teams.

However, we believe the company's da Vinci Si Surgical System is expected to capture a sizeable market share in the minimally invasive surgery market over the next few years

Currently, Intuitive Surgical retains a Zacks Rank #3 (Hold).

Other Stocks to Pick

Other players in the medical instruments sector that are currently worth a look include Cynosure Inc. CYNO, Natus Medical Inc. BABY, and Syneron Medical Ltd. ELOS. All the three stocks sport a Zacks Rank #1 (Strong Buy).