Here's Why Shares in This Surgery Robot Company Are Booming

Intuitive Surgical Inc on Tuesday reported better-than-expected first-quarter profit on expanded use of its da Vinci robots in U.S. general surgeries such as hernia repair, and it raised its full-year outlook for procedure growth.

The company now expects procedures using da Vinci robots to increase 12 percent to 14 percent in 2016, helped also by a favorable outlook for prostate and gynecological surgeries, executives said on a conference call. Intuitive previously forecast procedure growth of 9 percent to 12 percent.

In the first quarter, procedures using da Vinci robots rose 17 percent worldwide from a year ago, driven by growth in U.S. general surgery and overseas urological surgeries.

Growth in hernia repair was robust, and the robot saw continued adoption in colorectal surgery, executives said. The company is also focused on expanding use of the robot in thoracic procedures, particularly complex cancer cases.

“You are seeing both clinical and economic benefits with robotic surgery use in these procedures,” said Canaccord Genuity analyst Jason Mills.

Excluding one-time items, Intuitive said it earned $4.42 a share. Analysts on average expected $4.33 a share, according to Thomson Reuters I/B/E/S.

Net profit for the quarter rose to $136 million, or $3.54 a share, from $97 million, or $2.57 a share, a year ago.

The company’s net quarterly profit had been projected at $3.43 a share, according to Thomson Reuters I/B/E/S.

Revenue rose 12 percent to $595 million.

The company shipped 110 da Vinci systems in the first quarter, up from 99 units in the year-ago period.

The company said it had made steady improvements in reducing product costs, including for surgical instruments, and expected to make additional progress this year and in 2017.

Intuitive is also boosting spending on research and development, particularly in the areas of imaging and analytics, Chief Executive Gary Guthart said in an interview.

Intuitive is now the only maker of robotic surgical systems for the U.S. market, but is expected to face competition in the next few years from Medtronic Plc, a startup funded by Johnson & Johnson and Alphabet Inc’s Google, and others.

Guthart said the company’s focus on developing cost-effective technologies that improve outcomes for patients had not changed.

“As competitors come in, they are going to have to work within that same framework,” Guthart said.