17 April 2020

Intuitive Surgical Carves Out Growth Amid Virus Fears

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What’s happening: Shares of Intuitive Surgical spiked more than 5% in extended trading yesterday, after the company reported its first-quarter results ahead of expectations.

What happened: The pioneer of robotic-assisted surgery pleasantly surprised markets with its upbeat quarterly results, despite the coronavirus slowdown.

Intuitive Surgical reported growth in both revenue and profits, beating Wall Street estimates, while the performance of most companies in the US has been disappointing, with top- and bottom-line declines. And, the company’s stock was rewarded by investors. Despite this optimism, many concerns remain.

  • Net income grew to $314 million, or $2.62 per share, from $307 million, or $2.56 per share, in the year-ago quarter.
  • Sales climbed to $1.1 billion from $307 million, surpassing expectations of $1.03 billion.
  • Adjusted earnings rose to $2.69 per share, from $2.61 per share, exceeding the consensus view of $2.64 per share.

Why it matters: Despite the 13% growth in revenue, which exceeded $1 billion for the first time, it marked a deceleration from the growth achieved by Intuitive Surgical in the recent past. In fact, it was the slowest growth in revenue since June 2017.

Intuitive Surgical is beginning to feel the heat from the coronavirus-related slowdowns and said it is unable to estimate the damage the virus could cause to its business. Management refrained from issuing guidance for the year.

Various patients are postponing their elective surgeries following the coronavirus outbreak in the country. The Sunnyvale, California–based company witnessed a sharp drop in procedure volumes with various healthcare systems diverting resources to combat against the virus.

As a result of this, procedures around the world using the Da Vinci systems grew a mere 10%, much lower than its typical growth range in the mid-to-high teens. The company’s shipments of Da Vinci robotic surgery systems also grew by only 1% to 237 systems during the quarter.

How the shares responded: Intuitive Surgical’s shares slipped 0.1% during regular trading hours on Thursday, but recovered sharply to record a 5.6% gain in after-hours trading following the release of a strong quarterly report. The company’s stock has been trading flat over the past five days, but has gained 26% in the past month.

What to watch: With various countries considering plans of reopening their economies, given the decline in coronavirus cases, patients who had delayed their surgeries may return for treatments. Investors expect Intuitive Surgical’s business to exhibit a strong recovery when everything returns to normal.

The Markets Today

     

US stocks will be in focus today, after a turbulent session on Wall Street on Thursday.

Context: US stocks closed mostly higher on Thursday, after a volatile session that saw stocks swinging wildly between gains and losses for most of the day. Investors also assessed the dismal economic data from the country.

Details: After dropping more than 200 points in the earlier session, the Dow pared losses and settled higher at the end of the trading day. Tech-related stocks benefitted the most, with people relying to technology while staying and working from home during the coronavirus outbreak.

Most of the earlier weakness in yesterday’s session was driven by poor economic numbers, which pointed towards an early hit to the US economy. The Labor Department reported that 5.245 million Americans had filed for jobless benefits in the latest week, bringing the total number of job losses to 22 million due to the COVID-19 outbreak. The Philadelphia Federal Reserve’s business conditions index tumbled to its lowest level since 1980, while US housing starts dipped 22.3% in March.

The Dow rose 33.33 points to settle at 23,537.68 on Thursday, while the S&P 500 climbed 0.6% to 2,799.55. The Nasdaq 100 erased its 2020 losses, jumping 1.7% to close at 8,532.36.

With people being homebound, Netflix’s stock climbed around 3% to a record high. Meanwhile, Morgan Stanley came under pressure after reporting downbeat first-quarter results on Thursday.

New York disclosed a further decline in hospitalisation rate, but the state’s Governor Andrew Cuomo said non-essential businesses will remain closed till May 15. However, US President Donald Trump announced plans late Thursday for states to gradually relax their lockdown restrictions in three phases.

What to watch: Investors await more details of the reopening of the economy and expect a slowdown in coronavirus cases. US stocks are likely to open sharply higher today, with the stock futures pointing towards a strong start.

The US economic calendar is light today, with only the index of leading economic indicators being scheduled for later in the day. The Conference Board Leading Economic Index, which rose 0.1% in February, is expected to decline 7% in March.

Other Markets: European indices were trading higher at 9:00a.m. GMT, with the FTSE 100, German 30 and French 40 up by 2.8%, 3.5% and 3.7%, respectively.

Support & Resistances
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market snapshot

     

Futures at 0400 (GMT)

News shaping
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What else to watch today

     

India’s foreign exchange reserves, Canada’s new motor vehicle sales and foreign stock investment and the US Baker Hughes crude oil rigs.

 

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