Barclays Bullish On Intuitive Surgical On Heels Of Earnings Report

Intuitive Surgical, Inc. ISRG reported robust quarterly reports, with the revenue and EPS beating the consensus expectations.

Barclays’ Matthew Taylor maintains an Overweight rating on the company, while raising the price target from $690 to $750.

Beat Quarter

Intuitive Surgical reported revenue of $670 million, representing a 14 percent year-on-year increase, driven primarily by systems revenue, which came in at $203 million, beating the consensus forecasts.

Instrument and accessory revenue grew 14 percent to $339 million, ahead of the consensus, while service revenue came in at $128 million, beating the consensus.

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“This led to a big EPS beat,” Taylor mentioned, while adding, “Performance was driven by strong procedure growth that was well balanced across geographies, and with continued growth in the US in general surgery, and modest growth in urology and gynecology.”

Guidance

Intuitive Surgical raised its procedure growth guidance. The company, however, expects procedure growth to moderate in 2H16, driven by urology growth starting to track closer to market growth over time.

The company also expects fewer lease buyouts and lower upgrade revenue, with lower ASPs in 2H driven by channel and product mix.

Intuitive Surgical guided to FY2016 pro-forma gross margin of 70–71 percent of net revenue.

“We continue to be bullish on the outlook for ISRG, although we note more challenging comps and expected procedure growth moderation could make multiple expansion tougher from here,” Taylor stated.

At time of writing, Intuitive Surgical was up 6.56 percent in Wednesday's pre-market session, trading at $716.00.

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