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Is Earnings Beat Likely for Intuitive Surgical (ISRG) in Q4?

We expect Intuitive Surgical Inc ISRG to beat earnings expectations when it reports fourth-quarter 2016 and full-year results on Jan 24, after the closing bell. Last quarter, the company reported earnings of $5.39 per share, which exceeded the Zacks Consensus Estimate by $1.04.

We note that on average, Intuitive Surgical posted a positive earnings surprise of 17.86% over the last four quarters. Over the past one year, Intuitive Surgical returned almost 19.27%, which is higher than the Zacks categorized Medical Instruments sub-industry’s gain of roughly 9.88%. Also, Intuitive Surgical has a decent earnings surprise history, as evident from the chart below:



 

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Why a Likely Positive Surprise?

We believe that growing adoption of Intuitive Surgical’s da Vinci system among physicians for general surgery, oncology, urology and gynecology procedures is a key catalyst. In this regard, the venture with Dextera Surgical to initiate a joint development program on robotic staplers for da Vinci Surgical System is notable. da Vinci procedures increased approximately 15% year over year in the fourth quarter of 2016.

Moreover, rising procedural volumes outside the U.S. (particularly in Europe) fortifies the company’s market position. In 2016, approximately 753,000 surgical procedures were performed with the da Vinci Surgical System. This reflects an increase of approximately 15% from approximately 652,000 procedures performed in 2015. The growth in overall 2016 procedure volume was primarily driven by growth in U.S. general surgery procedures and worldwide urologic procedures. In fact, the integrated Table Motion product line has gained significant traction within a short span of time and is likely to boost the top line.

Meanwhile, increased spending on product development and higher investments in expanding the company’s footprint in international markets are prudent moves to drive long-term growth in our view.

Earnings Whispers

Our proven model does conclusively show that Intuitive Surgical is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is the case here as you will see below.

Zacks ESP: Intuitive Surgical currently has an Earnings ESP of +1.71%. This is because the Most Accurate estimate stands at $5.35 and the Zacks Consensus Estimate is pegged at $5.26. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Intuitive Surgical carries a Zacks Rank #3. The combination of Intuitive Surgical’s favorable Zacks Rank and positive ESP makes us reasonably confident of an earnings beat in the upcoming release.

Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revision.

Stocks to Consider

Here are some companies you may consider as our model shows that they have the right combination of elements to post an earnings beat in the upcoming quarter:

athenahealth Inc. ATHN, with an Earnings ESP of +7.41% and a Zacks Rank #3. Additionally, the stock witnessed a positive surprise of almost 66.7% last quarter.

Amsurg Corp. EVHC, posted a positive earnings surprise of 1.9% in the preceding quarter.  It has an Earnings ESP of +2.50% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

DaVita HealthCare Partners DVA has an Earnings ESP of +5.50% and a Zacks Rank #3. We note that the company posted a positive earnings surprise of 10.6% last quarter.

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athenahealth Inc. (ATHN): Free Stock Analysis Report
 
Intuitive Surgical Inc. (ISRG): Free Stock Analysis Report
 
DaVita HealthCare Partners Inc. (DVA): Free Stock Analysis Report
 
Envision Healthcare Corp. (EVHC): Free Stock Analysis Report
 
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