Intuitive Surgical Inc. (ISRG) is set to report fourth-quarter 2014 results on Jan 22. Last quarter, Intuitive Surgical reported earnings of $3.24 per share, which beat the Zacks Consensus Estimate by 56 cents.
Let’s see how things are shaping up for this quarter.
Factors at Play
We believe that the company is witnessing an increased adoption of its da Vinci system in U.S. general surgery procedures and worldwide urologic procedures. Remarkably, in 2014, nearly 570,000 surgical procedures were performed with the da Vinci Surgical system.
Intuitive Surgical estimates da Vinci procedure growth of roughly 10% and 9% year over year for the fourth-quarter and full-year 2014, respectively.
Though the company’s flagship da Vinci system is instrumental in driving top-line growth, we feel that the high price of the systems may slightly hinder its widespread adoption. Moreover, adoption growth takes time, as each procedure needs to gain credibility.
We note that Intuitive Surgical placed only 431 da Vinci surgical systems during 2014, compared with 546 systems during 2013. Consequently, da Vinci systems revenues are estimated to decrease nearly 24% to $633 million in 2014.
Earnings Whispers?
Our proven model does not conclusively show that Intuitive Surgical is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Intuitive Surgical has a -0.30% ESP. That is because the Most Accurate estimate stands at $3.38 per share, lower than the Zacks Consensus Estimate of $3.39.
Zacks Rank: Intuitive Surgical has a Zacks Rank #3 (Hold) which increases the predictive power of ESP; but when combined with a -0.30% ESP, it makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are a few stocks worth considering that, per our model, have the right combination of elements to post an earnings beat this quarter:
HCA Holdings (HCA) with an Earnings ESP of +5.74% and a Zacks Rank #1 (Strong Buy).
AbbVie (ABBV) with an Earnings ESP of +1.18% and a Zacks Rank #2 (Buy).
McKesson Corp (MCK) with an Earnings ESP of +1.91% and a Zacks Rank #2.
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