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Cantor Lops PT on Intuitive Surgical (ISRG) to $420; Not Yet at Inflection Point, N-T Catalysts Still Stagnant

April 23, 2014 6:49 AM EDT
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Price: $392.62 -0.92%

Rating Summary:
    27 Buy, 9 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 20 | Down: 14 | New: 22
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Cantor Fitzgerald maintains a Hold rating on Intuitive Surgical (Nasdaq: ISRG) following Q1 results, but is cutting its price target from $450 down to $420.

Analyst Jeremy Feffer notes that the company has not yet reached an inflection point. The analyst commented, New product launches—including the high-end Xi, the Sp single-port patient-side cart, and associated instruments still to be approved—are not likely to help in 2014 but do provide a glimpse at what we think will be a brighter long-term future. In the meantime, however, we expect ongoing volume headwinds - both secular and macro - to make the next 2-3 quarters very difficult, although the company's $1b outstanding repurchase authorization keeps us from becoming more negative in the short-term.

On guidance, Feffer said, As we suspected when Intuitive preannounced 7% 1Q procedure growth, the company's previous 9-12% 2014 procedure growth guidance would have to come down, but the new 2-8% range is significantly lower than what we expected. Management again cited the usual suspects—hospitals moving away from benign hysterectomies, continued declines in U.S. prostatectomies, and choppiness in Japan due to lack of broader reimbursement. However, the company also mentioned near-term headwinds related to the FDA's recent statement of caution regarding power morcellation in gynecological procedures; initially that statement was thought to benefit da Vinci, which does not employ morecellators. But with hospitals approaching these benign procedures more conservatively, we expect further downward pressure on volumes this year and are now modeling 4% procedure growth for 2014.

For FY14, Feffer's revenue and EPS estimates move from $2.33 billion and $15.02 down to $2.02 billion and $10.41. For FY15, the adjustment takes revs and EPS from $2.56 billion and $17.93 down to $2.24 billion and $15.00.

For an analyst ratings summary and ratings history on Intuitive Surgical click here. For more ratings news on Intuitive Surgical click here.

Intuitive Surgical closed at $422.33 yesterday.



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