Intuitive Surgical, Inc. Continues Its Trend of Robust Growth

By Brian Stoffel – July 20, 2016


As far as shareholders are concerned, Intuitive Surgical (NASDAQ:ISRG) is putting together one of the strongest “winning” streaks in its history as a publicly traded company. It reported earnings last night that were just about as positive as anyone could have reasonably hoped for. Here’s why the market’s so excited, pushing the stock up by over 4% today.

Remarkable growth

Intuitive Surgical recorded revenue growth of 14% during the quarter, coming in at $670 million. But earnings growth was even more impressive, with non-GAAP earnings increasing 23% to $5.62 per share. That jump was made possible because operating expenses rose just 6% and gross margins expanded significantly, from 65.9% last year to 70.3% during the second quarter.

The takeaway from this is that Intuitive Surgical is in a sweet spot right now. The investments that the company has made over the past few years — especially in its sales force abroad and in its newer daVinci Xi system — are truly paying off. The company didn’t need to spend significantly more this year than last, but thanks to continuing growth in operations, revenue spiked markedly.

Where’s all that growth coming from?

Back in 2013, procedure growth had slowed to the mid-single digits. With professionals calling the efficacy of robotic surgery in hysterectomies into question, investors were worried that they were seeing the end of daVinci’s relevance in the operating room.

But then, those listening to conference calls noticed something coming up again and again and again: the potential good that daVinci could do in improving outcomes from hernia operations. Since then, colorectal operations have joined hernia procedures as the key drivers of growth.




Drue is Managing Partner for The De Angelis Group.

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