Shares of Intuitive Surgical (NASDAQ:ISRG) performed notably in 2018, even with the late-year market downturn. After being up more than 50% at one point, the stock ended the year sporting a 31% gain -- a far cry from the S&P 500's 6% decline. This is testament to the company's strong underlying performance.

The maker of the minimally invasive da Vinci Surgical System will have another opportunity to impress investors in the coming week, as Intuitive Surgical is scheduled to report its fourth-quarter and year-end results on Thursday, Jan. 24, after the market close. Let's dive into the company's recent results to find insight into what investors can expect.

Two surgeons sitting at consoles in an operating room, with nurses in attendance conducting robotic surgery.

Robotic surgery with the da Vinci system. Image source: Intuitive Surgical.

Underlying performance was strong

For the third quarter, Intuitive generated revenue of $921 million, up 14% year over year, while adjusted earnings per share of $2.83 were up just 2%. 

These numbers require context, however. The prior-year revenue got a boost of $21 million from deferred revenue related to trade-ins. Adjusting for that one-time event, revenue grew by 17%. Changes in the tax law resulted in a one-time benefit to prior-year earnings as well. Adjusting for these anomalies would have resulted in profitability that grew by 33%.

Additionally, the number of operating leases tripled. Revenue from the sale of a system is recorded immediately, while revenue from operating leases is recognized over the duration of the lease. Revenue growth appears lower over the short term, as a large part of the transaction is realized in future periods.

On the operational side, da Vinci procedures increased by 20% worldwide year over year, while system shipments hit 231, up 37%.

Preliminary earnings results

Intuitive released preliminary results for the fourth quarter last week, so there shouldn't be too many surprises. The company reported estimated revenue of $1.047 billion, an increase of 17% year over year. The company didn't provide profit metrics in its release. 

Procedures increased by 19% year over year in the fourth quarter, and topped 1 million annually for the first time in 2018. And 290 da Vinci Surgical Systems were shipped during the quarter, up 34% versus the prior-year quarter.

Beyond the numbers

In September, the company submitted a pre-market notification to the Food and Drug Administration (FDA) for the Ion endoluminal system, its new flexible, robotic-assisted, catheter-based platform. The system is designed to navigate through very small passageways in the lungs to reach peripheral nodules for biopsies. 

By submitting this notification, Intuitive is signaling that the device is "at least as safe and effective, that is, substantially equivalent, to a legally marketed device," according to the FDA. This is a much less stringent process that applies to products using technology that has previously been approved in another device.

The Ion helps doctors more effectively diagnose lung cancer, by getting to areas of the lungs that were previously inaccessible. This will open up a whole new market for Intuitive Surgical, which is good news for investors.

The company also said that it obtained clearance from regulators in China for the da Vinci Xi Surgical System, and was advised that the China National Health Commission announced a new quota of 154 surgical robots through 2020, which includes the da Vinci.

What the market expects

While investors shouldn't place too much emphasis on expectations, it can be a good way to gauge Wall Street's overall feeling for a company. Analysts were expecting $1.03 billion in revenue, up 15.8% year over year, and adjusted EPS of $3.06, an increase of 20%. Intuitive's preliminary revenue estimate already exceeds those expectations, which likely bodes well for the company. 

Intuitive Surgical doesn't provide quarterly guidance, and the release of the preliminary results removes much of the mystery. That said, the fourth quarter is typically a seasonally strong one for the company, and the numbers it provided in the preliminary release were likely conservative. There may still be some upside when it reports on Jan. 24.

Check out the latest Intuitive Surgical earnings call transcript.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.