Leerink Boosts Intuitive Surgical Price Target To $640

• Shares of Intuitive Surgical, Inc. ISRG have appreciated 18.94 percent over the past three months, reaching a high of $553.24 on January 6.
• Leerink’s Richard Newitter has maintained an Outperform rating on the company, while raising the price target from $600 to $640.
• The company has preannounced its Q4 results ahead of the consensus, while Newitter believes that the 2016 procedure guidance could prove to be conservative.

Analyst Richard Newitter elaborated that the company had preannounced “above consensus 4Q led by system placement outperformance and dd procedure growth.”

Intuitive Surgical's procedure guidance of 9-12 percent for 2016 is at the high-end of the consensus forecast and is expected to potentially beat expectations.

The company reported its Q4 sales at $677 million, ahead of the estimate and the consensus, driven mainly by higher system placements.

Intuitive Surgical placed higher than estimated Xi in Q4. However, given that Xi entails lower gross margin, Newitter believes that the overall Xi outperformance could lead to a slightly negative impact on the overall gross margin.

In addition, procedure growth for 2015 beat expectations, with strong growth of 15 percent in Q4. “Overall, dV volume in 2015 was driven by stronger y/y trends in ISRG's mature procedures as well as accelerating general surgery growth,” Newitter stated.

While urology outperformed, general surgery saw robust growth in the double digits. General surgery is expected to be a key procedure growth driver in the coming quarters.

With regard to the 2016 procedure guidance, Newitter believes that management “is taking a conservative approach to guidance at the onset of the year and that the upper end of this range is likely achievable.”