Intuitive Surgical Shares Expected To Trade Significantly Higher, Says Canaccord

"We expect the stock to trade materially higher, as we are increasingly confident robotic-assisted surgery devices (RASD) are in the midst of a multi-year utilization uptrend in the general surgery realm, as more surgeons seek to expand their competencies and broaden their practice beyond conventional MIS techniques," analyst Jason Mills wrote in a note.

Second-Quarter Print

The second-quarter EPS of Intuitive Surgical, which makes da Vinci Surgical Systems, came in at $5.62, a 13 percent, or $0.65, beat over consensus estimate of $4.97.

Related Link: Barclays Bullish On Intuitive Surgical On Heels Of Earnings Report

The firm's cash balance increased over $400 million to $4.2 billion, and the analyst continues to see strong uptake of da Vinci robotic surgery in hernia, colectomy, rectal resection and thoracic procedures.

Mills, who has a Buy rating on the stock, expects Intuitive Surgical to continue to produce double-digit procedure growth through 2017 at least, given new important, concomitant technologies that increases the utility and performance of da Vinci even further.

"On the new technology front, management gave new details on the single port (Sp) robotic platform and new imaging technologies to augment our bullishness about the long-term growth opportunities for ISRG," Mills noted.

Guidance

The company hiked its 2016 procedure growth guidance to 14–15 percent from 12–14 percent and it is the second guidance increase in as many quarters. Intuitive Surgical also raised its gross margin forecast to 70–71 percent from 69–70 percent.

Analyst's Outlook

The analyst upped his 2016 sales outlook to $2.66 billion from $2.61 billion, while his pro forma EPS estimate increases to $21.48 from $20.27. For 2017, Mills raised his sales estimate to $2.95 billion from $2.85 billion, while his adjusted EPS projection goes up to $24.33 from $22.97.

At the time of writing, shares of Intuitive Surgical rose 5.85 percent to $711.20. Mills' revised price target of $750 implies a potential return of 12 percent from Tuesday's close.

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