Analysts React To Intuitive Surgical Q3 Performance, Slash Price Targets

Intuitive Surgical Inc ISRG shares fell by around 3%. Several analysts lowered estimates post Q3 FY23 earnings. 

ISRG reported quarterly earnings of $1.46 per share, which beat the analyst consensus estimate of $1.41, and sales of $1.74 billion, which missed the analyst consensus estimate of $1.77 billion. 

The company revised its FY23 procedure volume outlook to 21%-22% (from 20%-22%), reflecting uncertainty around the duration of elevated procedure volumes with patients returning to health care, a continued slowing bariatric growth rates in the U.S. and macroeconomic challenges that could impact hospitals and patient spending.

Also, ISRG cut the gross margin outlook by 25bps at the midpoint to 68.0%-68.5% (vs. 68.0-69.0% previously) to reflect the timing of facilities completion, manufacturing efficiency improvements for new products and other complex projects and sees gross margin of = +70% over time in the medium term.

RBC Capital Markets analyst Shagun Singh maintained the Outperform rating and a price target of $355.00.

The analyst estimates revenue of $7.09 billion (+14.1% y/y ex-fx) vs. consensus of $7.19 billion for FY23, including the assumed procedure volume growth of 21.5% y/y and systems shipped growth of 4.8% y/y. 

Singh estimates EPS of $5.60 (+19.5% y/y), gross margin of 68.3% (-90bps y/y), and operating margin of 34.1% (-50bps y/y) for FY23.

Piper Sandler analyst Adam C. Maeder reiterated the rating on the stock at Overweight and lowered the price target to $325 (from $385). 

The analyst revised revenue and EPS estimates to $7,072.9 million (from $7,162.4 million) and $5.59 (from $5.58) for FY23 and $8,104.6 million (from $8,184.4 million) and $6.20 (from $6.43) for FY24. 

Mizuho Securities analyst Anthony Petrone reaffirmed a Neutral rating and price target of $320.00.

The analyst lowered FY23 revenue and EPS estimates to $7.043 billion (from $7.103 billion) and $5.55 (from $5.45 earlier), reflecting a stable outlook for overall da Vinci procedures offset by a further slowdown in U.S. bariatrics and China capital placements.

The analyst writes that prevailing price levels will likely prove a floor through year-end as GLP-1/ China headwinds are further debated.

William Blair analyst Brandon Vazquez maintained an Outperform rating.

The analyst sees several tailwinds to support double-digit sales and EPS growth in 2024, including continued uptake in U.S. general surgery, da Vinci SP adoption, Ion launch internationally, and potentially a next-gen multiport system.

Raymond James analyst Jayson Bedford maintained an Outperform rating and lowered the price target to $310 from $368. 

The analyst revised estimates for revenue and adjusted EPS to $7,062 million (from $7,127 million) and $5.60 (from $5.57) for FY23 and $7,887 million (from $8,141 million) and $6.22 (from $6.36) for FY24. This reflects higher leasing and slightly lower gross margins. 

Price Action: ISRG shares are down 2.42% at $266.85 on the last check Friday.