Buy the rumor, sell the news.

It's an approach to investing (albeit not a Foolish one) that typically serves investors well in the health care arena, particularly ahead of binary event catalysts such as approval decisions from the Food and Drug Administration. However, it doesn't always take huge regulatory events to move shares higher or lower. In Intuitive Surgical's (NASDAQ:ISRG) case, mixing equal parts Wall Street upgrade with an impending earnings report provided the perfect environment for volatility.

The rumor
On Monday, JPMorgan analyst Tycho Peterson came out with research note boosting both his price target and rating on the stock. In general, upgrades and downgrades ahead of earnings reports are the epitome of Wall Street's short-term thinking, but in this instance, Peterson made it clear that this was a long-term call poised to play out over several years, and there were numerous near-term headwinds to keep in mind. In any case, investors cheered the upgrade and bid shares up by nearly 8% going into today's earnings release.

The news
Following the closing bell, Intuitive reported both revenue and earnings that surpassed consensus expectations. The 20% boost in revenue to $538 million ($535 million consensus estimate) was helped by a 24% increase in instruments and accessories, and a 17% increase in systems sales. EPS of $3.53 came in $0.03 ahead of expectations after backing out a $38 million one-time tax benefit. Shares were nearly 5% lower in after-hours trading.

So, what's driving the decline? Outside of reversion to the mean following the pre-earnings run-up, it may have to do with some negative details around procedural volume growth. That number came in lower than management expectations at 22% due in part to a slowdown in Europe.

However, that kind of modest slowdown was to be expected following news from the likes of Edwards Lifesciences (NYSE:EW), whose shares dropped sharply after blaming European austerity measures for a dampened quarterly outlook . Even diversified medical devices juggernauts such as Johnson & Johnson (NYSE:JNJ) are feeling the pinch from overseas, with management noting that procedural volumes were declining in Europe versus a slight pickup in the U.S. in the past quarter.

Foolish bottom line
The quarter's short-term headwinds offered little in terms of red flags for the long-term investors. Minimally invasive surgery continues to take share in operating rooms across the country, and Intuitive is well-positioned to grow by expanding its installed base and moving into new surgical areas such as general surgery. 

Brenton Flynn has no positions in the stocks mentioned above. The Motley Fool owns shares of Intuitive Surgical, Johnson & Johnson, and MAKO Surgical. Motley Fool newsletter services recommend Intuitive Surgical, Johnson & Johnson, and MAKO Surgical. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.