Why MAKO Earnings Won't Rebound Soon

MAKO Surgical (MAKO.DL) will release its quarterly report on Tuesday, and investors are preparing for another substantial loss from the robotic-surgery system maker. Despite the promise of the company's technology as another step forward for medical science, MAKO earnings face the challenges of slow growth, high taxation, and general criticism of the industry.

One problem with being in an innovative industry is that the actions of competitors can reflect badly on your profit. That's part of what MAKO has had to face lately, as rival Intuitive Surgical has borne the brunt of criticism for its da Vinci robotic-surgical system. Yet, MAKO also has its own issues to overcome in returning to a higher-growth trajectory. Let's take an early look at what's been happening with MAKO Surgical over the past quarter, and what we're likely to see in its quarterly report.

Stats on MAKO Surgical

Source: Yahoo! Finance.

When will MAKO earnings become profitable?
Analysts have gotten more pessimistic about the prospects for MAKO earnings in recent months, widening their June-quarter loss estimates by $0.06 per share, and predicting more extensive losses for the full 2013 year, as well. The stock has managed to rebound from its swoon earlier in the year, however, with gains of 18% since late April.

Most of MAKO's share-price gains came early in the quarter, after MAKO reported better-than-expected revenue in its first-quarter results. Losses also narrowed, with the company selling five of its RIO systems, all of which included an upgrade to allow for total hip arthroplasty procedures. Growth in procedure counts hit 30% year over year, with substantial gains in hip procedures pointing to the potential of that niche.

Despite differences in their businesses, MAKO investors continue to look at Intuitive Surgical as a guide to where the overall industry is going. As a result, Intuitive's recent pre-announcement that its revenue and earnings would fall well short of expectations due to poor sales of its da Vinci systems hurt MAKO's stock, as well. Even in the wake of claims that certain da Vinci procedures don't add enough value to justify the extra expense of using the system, MAKO has been diligent in releasing clinical research that points to the benefits of the RIO system in reducing pain and improving overall accuracy.

The biggest potential growth driver for MAKO's RIO system is to expand its use into other types of procedures. Possible areas would be shoulder repairs, and total knee replacements, both of which could help boost use of the RIO toward levels that Intuitive's da Vinci systems have been able to achieve.

Still, MAKO faces some big challenges. Despite an improving economy, health-care facilities are still reluctant to boost capital spending, and that could continue to pressure RIO system sales. Moreover, taxes on medical-device sales from Obamacare sap a percentage of MAKO's total revenue, despite the fact that the company isn't profitable.

In the MAKO earnings report, watch to see whether the company's sales continue to track with Intuitive's results. If they diverge, then it could spell relief for investors, who've grown tired of the guilt-by-association that has pulled the two companies' stocks down in tandem. Regardless, though, MAKO has a long way to climb before it's likely to post a profit.

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