Intuitive Surgical Inc. ISRG is scheduled to release first-quarter 2015 results after the closing bell on Apr 21. In the last reported quarter, Intuitive Surgical’s adjusted EPS of $4.18 steered past the Zacks Consensus Estimate by 21.8% or 75 cents, but declined 4.1% on a year-over-year basis.
On an average, Intuitive Surgical has outperformed the Zacks Consensus Estimate by 5.8% over the last four quarters. Let’s see how things are shaping up for this announcement.
Factors at Play
The growing adoption of Intuitive Surgical’s da Vinci system among physicians for general surgery, oncology, urology and gynecology procedures is a key growth catalyst in our view. Moreover, increasing procedure volume outside the U.S. presents significant growth opportunity for the company.
We believe that Intuitive Surgical’s upcoming Xi compatible Da Vinci SP will further expand its product portfolio. 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.
Unfavorable product mix, headcount addition and higher incentive compensation have dragged down margins over the last couple of quarters and we feel that margins will remain under pressure in 2015 as well.
Further, volatile foreign exchange is expected to remain a major headwind for Intuitive Surgical in 2015. Moreover, declining financing from hospitals reflect sluggish spending environment, which will continue to hurt top-line growth while continued investments in product development will impact profits.
Consequently, 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.
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. This is not the case here as you will see below:
Earnings ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00% as both these parameters stand at $2.85 a share.
Zacks Rank: Intuitive Surgical carries a Zacks Rank #3 (Hold) which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Biogen Inc. BIIB, earnings ESP of +0.51% and a Zacks Rank #1 (Strong Buy).
Mirati Therapeutics, Inc. MRTX, earnings ESP of +10.81% and a Zacks Rank #2 (Buy).
MEI Pharma, Inc. MEIP, earnings ESP of +3.45% and a Zacks Rank #2.
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