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Intuitive Surgical's stock jumps on strong Q2 earnings

Intuitive Surgical, a US-based designer, manufacturer and marketer of robotic-assisted surgical systems, issued string financial report for the second quarter of 2016. Revenues increased 14.3% y-o-y to $670.1 mn, driven by higher procedural volume and growth across all segments, and surpassed consensus estimate of $643 mn. Worldwide da Vinci procedure volumes grew approximately 16% to 176,000. Procedures in the US rose 13%, while that outside the US increased about 25%. The company shipped 130 da Vinci Surgical Systems compared with 118 in the year-ago quarter. Adjusted operating margin expanded 610 basis points to 38%, and adjusted earnings per share jumped 28.3% to $4.86 beating analysts’ average projection by 65 cents. The company ended Q2 with cash, cash equivalents and investments of $4.2 bn compared with $3.8 bn as of Mar 31.

Intuitive Surgical raised its full-year outlook for procedure growth. The company now expects procedures using da Vinci robots to increase 14-15% in 2016, helped also by a favorable outlook for prostate and gynecological surgeries. The previous forecast implied 12-14% growth. Intuitive Surgical also anticipates a 12-15% y-o-y increase in operating expenses in 2016, as it continues to invest in robotic assisted surgery.

I believe that growing adoption of Intuitive Surgical’s da Vinci system among physicians for general surgery, oncology, urology and gynecology procedures will remain a key growth catalyst going forward. Moreover, increasing procedural volumes outside the US also present significant growth opportunity for the company.

I expect Intuitive Surgical’s shares to continue growth, with medium-term target at $750.