Investors reacted by sending ISRG up more than 12% to $303.58 apiece by midday trading today.
The Sunnyvale, California–based surgical robotics developer yesterday evening reported profits of $355 million, or $1.oo per share, on sales of $1.7 billion for the three months ended March 31, 2023. That was a 14% growth in sales compared with Q1 2022 and a 3% increase in profits, though earnings per share (EPS) held steady year-over-year.
Q4 2022: Intuitive stock down amid next-gen robot disappointment
Adjusted to exclude one-time items, EPS were $1.23, three cents ahead of the Street, where analysts were looking for EPS of $1.20 on sales of $1.6 billion.
“Our core business was lifted by positive surgical trends and continued interest in robotic-assisted surgery when compared with other surgical approaches,” Intuitive CEO Gary Guthart said in a news release. “We continue our focus on increased adoption, pursuit of expanded indications and product launches, excellence in supply and product quality, and increased productivity as we scale our business.”
Much for investors to like in Intuitive’s Q1 report
Global da Vinci procedures grew by around 26% compared with Q1 2022. Intuitive said continued COVID-19 disruptions in China, Asia more broadly and the U.S. hurt procedure volumes.
The company reported 312 da Vinci Surgical System placements for the quarter compared to 311 in the prior-year period. The total installed base grew to 7,779, up 12% from the end of Q1 2022.
Guthart said on the earnings call that Intuitive is leveraging electronic medical record data to help health care systems understand which hospitals would benefit from robotic programs and how those programs perform financially.
“The quality of those conversations is fantastic,” he said. “The confidence they have to reinvest because they can see the data in their own hands — even if they don’t have it at a particular hospital somewhere in their network, they have it and they can do that analysis. That has changed the nature of the conversation in the last few quarters, and I think you’re starting to see the reflection of that now.”
CFO Jamie Samath said on the call that Intuitive will increase the da Vinci list price about 5% over the next couple of months, citing the “durability of component cost increases throughout the pandemic.”
He said the price increase does not reflect the entire increase of component and labor costs reflected in Intuitive’s gross margin, and should increase revenue and operating profit by about $100 million this year.
Investing in labor and manufacturing
Intuitive hiring in the first quarter increased its headcount by about 330 employees, Samath said, and roughly half of those “are in support of revenue growth.”
The company also spend $197 million on capital expenditures in the quarter, primarily to expand its facilities footprint and increase manufacturing capacity, including production line automation.
“We have been investing in the virtuous cycle of manufacturing capabilities,” Guthart said. “Some of the capital you hear us investing is both facilities and automation, getting our factories in the right places in the world for logistics and for labor. We’re doing those things to be able to lower our product costs and increase our quality as we get volume. That has been lumpy. I wish it was smoother, but it’s been a lumpy process for us.”
Guthart said the company had to scrap stapling instruments due to a raw material lot noncomformance. And manufacturing yields were down as Intuitive brought up new lines in its high-volume production facilities for multi-port accessory and Ion catheter growth.
“This is an opportunity for sharper execution going forward,” he said.
What analysts think
BTIG analysts kept their Buy rating on Intuitive stock and upped their price target to $313 per share, saying there was a lot for investors to sink their teeth into from the earnings report. Said Ryan Zimmerman, Sam Durno and Iseult McMahon: “We think investors are seemingly shrugging off concerns on system estimates being too high and even concerns on when ISRG is launching a next-gen [da Vinci].”
Truist analysts also stuck with Buy, raising their price target to $325 in a report with the headline “Procedure Growth So Good We Got a Hernia!”
Related: Intuitive co-founder Fred Moll and Avail CEO Daniel Hawkins discuss the digital OR
This story originally ran on April 18, 2023. Updated April 19 with next-day stock price, analyst comment.
