The maker of the da Vinci Surgical System, Intuitive Surgical (ISRG) has been under a tremendous amount of equity pricing pressure following a short attack and controversial comments from the American Congress of OB/GYN (ACOG) president James T. Breeden. We think Intuitive Surgical has managed well in what we’d describe to be a “perfect storm of negativity.”
On Tuesday, Intuitive Surgical revealed a sense of resiliency when it issued preliminary fourth quarter and full-year 2013 results. The company noted that it expects revenue for the fourth quarter to fall just 5% from the fourth quarter of 2012, a huge win for a company that has been pummeled from almost every direction. For the full year, the company expects total revenue to advance 4%. Intuitive Surgical had the following to say about underlying ‘instruments and accessories’ and ‘surgical systems’ revenue:
Full year 2013 instruments and accessories revenue is expected to increase approximately 14% to approximately $1,033 million. Fourth quarter and full year 2013 instruments and accessories revenue growth was driven by da Vinci procedure growth, partially offset by a reduction in stocking orders related to a decline in system sales.
Full year 2013 systems revenue is expected to decrease approximately 11% to approximately $835 million. The company sold 546 da Vinci Surgical Systems during 2013, compared with 620 systems during 2012. Lower fourth quarter and full year 2013 systems sales were driven by lower U.S. sales reflecting moderating procedure growth in benign gynecology, combined with changing hospital capital spending priorities associated with the implementation of the Affordable Care Act, partially offset by higher international systems sales, led by higher da Vinci system sales in Japan.
Valuentum’s Take
We think Intuitive Surgical has handled the attacks on its business particularly well, and we think this is why shares are bouncing today. We expect 2014 to be a much better year for the company, especially when deferred demand is satisfied. The company still has a lot to overcome in helping buyers through the process, convincing them of the benefits, but the long-term outlook for robotic-assisted, minimally-invasive surgery is bright. We’re sticking with the small holding of Intuitive Surgical in the portfolio of the Best Ideas Newsletter.