Shares of Intuitve Surgical Inc. (ISRG) rallied to a new 52-week high of $548.38 on Apr 13, eventually closing a tad bit lower at $542.31. This represents a strong one-year return of about 27.6%. The S&P 500 also jumped almost 14.3% during the same period.
On an average, Intuitive Surgical has outperformed the Zacks Consensus Estimate by 5.8% over the last four quarters. This Zacks Rank #3 (Hold) stock has a market cap of $19.54 billion and a long-term expected EPS growth rate of 9.2%.
Key Growth Catalysts
We believe that growing adoption of Intuitive Surgical’s Da Vinci system among physicians for general surgery, (hernia repair, colorectal), oncology, urology and gynecology procedures is a key growth catalyst.
Additionally, increasing procedure volume outside the U.S. presents significant growth opportunity for the company. In the fourth quarter, global da Vinci procedures grew approximately 10% on a year-over-year basis driven by higher general surgery procedures (up 33%) and worldwide urologic procedures (21%).
We believe that Intuitive Surgical’s upcoming Xi compatible Da Vinci SP will further expand its product portfolio. Moreover, the new share buyback program will boost Intuitive Surgical’s bottom line in 2015.
However, margins are expected to remain under pressure in 2015. Management expects gross margin to be more or less in line with the fourth-quarter estimate. The company forecasts operating expense increase in the range of 7% to 10% for the full year, taking into account continued investments being made by the company.
Further, a strong U.S. dollar, sluggish U.S. hospital spending, continuing investments in product development, headcount addition and increasing compensations will impact profits.
Estimate Revisions
The Zacks Consensus Estimate for the first quarter has declined 2.7% (8 cents) to $2.85 over the last 30 days. For 2015, the estimate has declined by 6 cents to stand at $14.44 over the same period, which reflects approximately 10% growth over 2014.
However, the consensus estimate for fiscal 2016 has increased 0.7% (12 cents) to $17.53 over the same period, reflecting Intuitive Surgical’s strong growth prospects.
Stocks to Consider
Better-ranked stocks in the sector are Inogen INGN, Abiomed ABMD and Luminex LMNX. While Inogen sports a Zacks Rank #1 (Strong Buy), Abiomed and Luminex carry a Zacks Rank #2 (Buy).
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