A resurgence in Covid cases weighed on Intuitive Surgical's second quarter, causing ISRG stock to plummet Friday following the robotic surgery giant's report.
During the June quarter, there were fewer than usual surgeries performed using Intuitive Surgical's bread-and-butter system, da Vinci. Procedure volume grew just 14%, down from 19% in the previous quarter. Further, Intuitive Surgical placed just 279 systems, a decrease of 15% year over year.
"The impact of the Covid-19 pandemic on the company's business has, and continues to, differ by geography and region," Intuitive Surgical said in a news release. "Covid-19 has had, and will likely continue to have, an adverse impact on the company's procedure volumes."
On today's stock market, ISRG stock toppled 5.7% to 211.85.
ISRG Stock: Why Procedure Volume Matters
Procedure volume is a key metric for Intuitive Surgical. The firm sells or leases its robotic surgery systems, but makes most of its money by selling one-time instruments and accessories. With a lower number of procedures comes lighter instrument and accessory revenue.
Overall, Intuitive Surgical reported $1.52 billion in second-quarter sales, missing forecasts by $40 million, according to FactSet. Adjusted profit came in at $1.14 per share, below expectations for $1.20 a share. Sales grew 4% year over year, the fourth straight quarter of deceleration. Earnings sank about 12% after the first quarter's 3% dip.
Revenue from instruments and accessories climbed more than 12% to $895.3 million. That beat views, UBS analyst Graham Doyle said in a report. But revenue from system sales fell roughly 15% to $375.1 million and were well below forecasts. Service sales were in line, growing 10% to $251.7 million.
Why System Placements Declined
The system placement decline came down to the chip shortage and a spending slowdown at hospitals, Evercore ISI analyst Vijay Kumar said in a report.
"The question for investors is whether the second-quarter miss was a bottom — to buy into this thesis, one has to believe that second-quarter issues are transient," Kumar said.
But U.S. hospitals are unlikely to dig deeper into their coffers to buy new systems, and Intuitive said there are just 230 systems, roughly, in the U.S. that currently need upgrades. Medtronic is expected to enter the market in 2023, which could pressure pricing, Kumar said.
"Rolling all of these, we are now modeling about 5% earnings-per-share declines for 2022," he said.
He slashed his price target on ISRG stock to 175 from 210, and kept his in line rating.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
