How Intuitive Surgical's Earnings Will Fare

On Thursday, Intuitive Surgical (NASDAQ: ISRG  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.

Intuitive Surgical was a pioneer in the surgical robotics field, leading the industry with its da Vinci robotic surgical system. But recently, the company has faced some new challenges that pose a threat to its growth story. Let's take an early look at what's been happening with Intuitive Surgical over the past quarter and what we're likely to see in its quarterly report.

Stats on Intuitive Surgical

Analyst EPS Estimate

$3.99

Change From Year-Ago EPS

14%

Revenue Estimate

$582.8 million

Change From Year-Ago Revenue

17.7%

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

Will Intuitive Surgical bounce back this quarter?
In recent months, analysts have downgraded their views on Intuitive Surgical's earnings. They've cut earnings-per-share estimates for the just-ended quarter by a nickel as part of a broader cut in full-year 2013 earnings by $0.22 per share. Yet despite some wild gyrations since early January, the stock price has landed back right about where it started.

The big negative news for Intuitive Surgical this quarter came at the end of February, when reports arose that the FDA was looking at questionable safety reports linked to the company's da Vinci surgical systems. Even though major studies have looked at the system's safety before and judged the da Vinci favorably, investors nevertheless sold first and asked questions later about the stock.

Yet the episode led to criticism of Intuitive Surgical in other arenas. Last month, the president of a major group of OB/GYNs said that using robotic systems for hysterectomy procedures -- a significant area of potential growth for the company -- lacked data showing its usefulness and made procedures far more expensive. That could reduce sales and have an impact not just toward the end of last quarter but for future periods as well. Moreover, you can expect traditional medical-instrument makers Johnson & Johnson (NYSE: JNJ  ) and Covidien (NYSE: COV  ) to step in to take advantage of the situation, as they stand to benefit substantially if robotics are shown to be inferior. Both J&J and Covidien supply more traditional instruments and supplies for surgical procedures, and regulators are more familiar with their safety profiles.

Competition in robotic surgical devices is also starting to get fiercer. MAKO Surgical (UNKNOWN: MAKO.DL  ) recently filed lawsuits against rivals Blue Belt Technologies and Stanmore Implants, with allegations of improper conduct by a former sales manager in the case of Blue Belt and of patent infringement against Stanmore. Just today, Stanmore gave in to most of MAKO's demands, deciding to give up its robotics business and sell its related assets to MAKO to settle the dispute. As for Intuitive, it hasn't yet seen a major direct competitive threat, but if the da Vinci gets past current safety concerns, growing popularity could drive big industry players to look at coming up with robotic systems of their own.

In Intuitive Surgical's earnings report, be sure to watch for the impact that the new medical-device tax under Obamacare has on the company's earnings. With the tax taken on sales rather than profits, Intuitive will be in a better situation than MAKO, which isn't even profitable yet will still be subject to the tax. For its part, Intuitive Surgical could see a substantial hit to its net income as a result of the tax, holding back its growth even further.

Intuitive Surgical expert Karl Thiel believes a visible path to long-term growth for the company still exists. Will Intuitive capitalize, or be crushed by unforeseen pitfalls? His report highlights all of the key opportunities and risks facing the company -- and includes a full year of ongoing updates as key new hits -- so be sure to claim your copy by clicking here now.

Click here to add Intuitive Surgical to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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