Intuitive Surgical (ISRG) Procedure Growth Drives Guidance Increase - Wedbush

Wedbush analyst, Tao Levy, noted that Intuitive Surgical's (NASDAQ: ISRG) robots were very busy this quarter. Procedure growth exceeded expectations at 17% yr/yr vs consensus of 12%, and management raises the guidance range to 12%-14% from 9%-12%.

Looking forward, the adoption in general surgery, specifically hernia repair and colorectal surgery, has hit an inflection point that should accelerate the conversion of this important specialty toward robotics. While some hospitals have been able to compete without offering patients the benefits of robotic surgery, we believe this may become more challenging as general surgery begins to transition toward the da Vinci system.

Systems revenue of $148 million was significantly below consensus estimate of $160 million but this reflects the success the company is having with its leasing program. Rather than collect on average $1.5 million for every system it installs, ISRG will capture lease payments on the system, which the analyst estimates at approximately $1.5 million over a 5 year period. While the operating lease program hurts revenue over the near-term, it is a win/win strategy as ISRG has made it much easier for hospitals to add a da Vinci system by significantly mitigating the financial obstacles.

No change to Outperform rating or $680 PT based on a 26x P/E multiple of forward cash EPS estimate plus cash on the balance sheet of $99/share.

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

Shares of Intuitive Surgical closed at $623.71 yesterday.

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