Intuitive profit tops estimates; Europe declines seen

Thu Jul 19, 2012 6:44pm EDT

(Reuters) - Intuitive Surgical Inc (ISRG.O) on Thursday cautioned that challenging economic conditions in Europe and declines in U.S. prostate surgeries were likely to persist, and its shares fell more than 5 percent.

The company continued its run of sailing past Wall Street earnings estimates, reporting higher-than-expected second-quarter profit and revenue, driven by increased sales of its da Vinci surgical robots and a 26 percent jump in procedures using the pricy systems.

Second-quarter net profit rose to $155 million, or $3.75 per share, from $117.4 million, or $2.91 per share, a year ago. That topped analysts' average expectations by 19 cents, according to Thomson Reuters I/B/E/S.

Intuitive raised its forecast for 2012 revenue growth to 20 percent to 23 percent, up from its prior view of 19 percent to 20 percent, but maintained its view on full-year procedure growth of 25 percent to 27 percent.

Revenue for the quarter rose 26 percent to $537 million, also exceeding Wall Street estimates of $522.8 million.

The company sold 150 da Vinci systems in the quarter, up from 129 a year ago and 140 in the prior quarter. At about $1.5 million each, systems revenue was $229 million.

Of the 150 systems sold, 124 were in the United States, while 26 were sold elsewhere -- down from 35 in the first quarter -- and only 13 of those in Europe.

Company executives told analysts on a conference call that the decline in European sales reflected "a difficult macroeconomic environment" and that they expect the spending constraints to persist there through the second half of the year.

In addition to concerns over Europe, ThinkEquity analyst Spencer Nam said shares were under pressure because procedure growth came in slightly below Wall Street expectations.

However, he said, "The fact that they placed more systems is a very good sign. This story is still very attractive as long as they keep placing boxes.

"In the last two years in no quarter have we seen both procedure volume growth and system placement fall below Street expectations," he said, adding that the company more often than not beats estimates on both measures.

Seven da Vinci systems were sold in Japan, which is expected to be a significant future market for Intuitive after the company received a positive reimbursement decision on prostatectomies earlier this year. It is pursuing reimbursement for other procedures in Japan.

Instruments and accessories sales jumped 30 percent for the quarter to $224 million. Procedures using the da Vinci systems rose 26 percent, as increases in U.S. gynecologic procedures and general surgeries helped offset a decline in U.S. prostatectomies and softness in Europe.

Recent studies have shown that many men with prostate cancer are more likely to die of something other than the disease and could avoid serious complications of surgery through monitoring of the cancer, also known as watchful waiting, until the disease progresses. That and calls for less frequent prostate cancer screening are taking a toll on da Vinci procedures, even though they have been associated with fewer complications than traditional surgery.

"It's hard to remain unaffected from current trends," Intuitive Chief Executive Gary Guthart said.

Intuitive shares, which had been up about 17 percent this year, fell to $515 in extended trading from their Nasdaq close at $544.21.

(Reporting by Bill Berkrot; Editing by Gary Hill, Steve Orlofsky, Leslie Adler)

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