Can Intuitive Surgical (ISRG) thrive on the health of da Vinci system in Q3?

Intuitive Surgical (NASDAQ: ISRG), a market leader in robotic-assisted surgical systems, continues to scale new heights aided by the success of its pioneering technology that got regulatory clearance about two decades ago. The medical devices firm is preparing to publish its third-quarter results Thursday after the market’s close. Analysts’ consensus earnings estimate is $2.99 per share, up 6% year-over-year. The growth reflects an estimated 16% rise in revenues to $1.06 billion.

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As usual, the performance will largely depend on the demand for the company’s flagship da Vinci Surgical System. It is estimated that the management’s efforts to enhance customer experience and reduce costs had a positive effect on the results. So, the Instruments & Accessories segment, which includes the da Vinci system and accounts for more than 50% of the total revenues, will be the key revenue driver this time.

Broad-based Growth

There has been a steady increase in da Vinci-based procedures and installed bases both in the US and in the international market, which is expected to have continued in the to-be-reported quarter. Initial estimates show that surgeons in the overseas markets performed more procedures than they did in the previous quarters, lifting the demand for the product.

At the same time, the Systems and Services segments stand to benefit from the success of the advanced imaging and augmented reality programs. Taking a cue from the steady growth in shipments, the company recently acquired the robotic endoscope business of Schölly Fiberoptic, brightening the long-term prospects of the business. Intuitive Surgical’s expertise in robotic surgery and innovations involving artificial intelligence give it an edge over competitors in this largely untapped healthcare segment.

Competition

The company, which has dominated the area of robotic surgery for several years, is currently facing competition with the entry of new players. Among the big names, Medtronic (MDT) is planning to hit the market in a big way, while Johnson & Johnson (JNJ) is doing the groundwork.

Looking Back

On the back of strong growth in the shipments of da Vinci systems, Intuitive Surgical’s second-quarter earnings and revenues rose in double digits to $3.25 per share and around $1 billion respectively. The results also topped expectations.

Related: Intuitive Surgical Q2 2019 Earnings Call Transcript

After retreating from its recent peak, the company’s shares are once again on the growth path. Hovering near the $520-mark ahead of the earnings report, they gained about 9% so far this year.

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