Intuitive Surgical Shares Slide Despite Earnings Beat, Analyst Support

Analysts are voicing support for Intuitive Surgical after the medical-equipment producer beat Wall Street's earnings expectations, but the shares are slipping.
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Analysts were voicing support for Intuitive Surgical (ISRG) - Get Report after the medical-instruments and -supplies company beat Wall Street's earnings expectations, but the shares were sliding.

The Sunnyvale, Calif., company, which makes and markets da Vinci surgical systems, reported fourth-quarter earnings of $3.48 a share on revenue of $1.28 billion, up from $2.96 a share and $1.05 billion in the year-earlier period.

Intuitive's results beat Wall Street's expectations of $3.37 a share of earnings and $1.23 billion of revenue.

At last check the shares were off 4.3% at $588.69.

Piper Sandler analyst Adam Maeder, who affirms an overweight rating on Intuitive Surgical with a $633 price target, said that investors may have been "somewhat surprised and disappointed" with some of the forward-looking commentary on the company's earnings call.

But he said Intuitive made clear that the landscape is expected to change and the company is adapting to solidify its leadership for the longer-term.

Despite the apparent down year for earnings growth, Maeder said, he continues to believe Intuitive Surgical is well positioned to drive robust sales growth. He also said the company's 2020 procedure growth guidance "looks very achievable."

JP Morgan analyst Tycho Peterson said the fourth-quarter results were solid and he raised his price target $665 from $575.

Peterson, who also reiterated an overweight rating on the company, said in a note to investors that Intuitive Surgical once again delivered a strong quarter, despite recent fears over a procedure slowdown. Procedure and placement momentum shows no signs of slowing, he said.

Intuitive Surgical continues to widen its "competitive moat" with a growing pipeline, Peterson said.

Raymond James raised its price target on the company, to $660 a share from $615, while maintaining an outperform rating. Intuitive Surgical's "results were consistent with the preannouncement and strong global execution," the firm said.

"We view 2020 guidance as appropriately conservative, with upside to our systems and procedure forecast," said analysts Lawrence Keusch and John Hsu.

Cantor Fitzgerald analyst Craig Bijou, who affirms an overweight rating with a $690 price target, said he viewed the company's reiterated procedure-growth guidance of 13% to 16% as likely conservative.

He said Intuitive Surgical this year again plans to reinvest in the business. He expects geographic and product mix to create headwinds on gross margin and tax rate and says this will likely bring down 2020 earnings estimates across Wall Street.

While management's profitability commentary could hurt the stock in near term, he said, the company has significantly outperformed analysts' initial revenue and earnings estimates in each of the past three years.

Bijou said the company's momentum should continue with the further launch of several new product platforms.