Intuitive Surgical (NASDAQ:ISRG) officially announced its second-quarter earnings results on Thursday after giving preliminary figures last week. The news isn’t any better for the robotic surgical systems maker. Shares dropped 13% following the earnings announcement.
On July 8, Intuitive said that it expected to report quarterly revenue of around $575 million and earnings of around $160 million. The company mentioned that while sales of instruments and accessories increased by 18%, sales of its da Vinci surgical systems fell by 6%. Intuitive said that this drop stemmed from “increased economic pressure on hospitals” and to “moderating growth” in benign gynecologic procedures.
Thursday’s announcement confirmed most of the earlier information. Revenue for the second quarter came in at $579 million, a little higher than the preliminary figure given but still well below initial expectations. The figures provided last week for increases in instruments and accessories sales and declining da Vinci surgical systems sales were on target.
Intuitive reported earnings of $159 million, or $3.90 per diluted share. That’s a paltry 2.8% increase year over year in earnings, but the per-share figure reflects a higher 4% jump due to share repurchases by the company. The average analysts’ estimate was $4.04 per share.
Although the revenue and earnings numbers weren’t a surprise to anyone, Intuitive Surgical (NASDAQ:ISRG) stock still fell nearly as much as it did following the sneak peek last week. Why another drop on results that everyone knew were coming?
The primary reason stems from Intuitive Surgical (NASDAQ:ISRG)’s guidance for the rest of the year. Previous guidance given by the company called for full-year da Vinci procedure growth of 20% to 23% The company now expects 15%-18% growth. Due largely to this slower growth, Intuitive projects full-year revenue will be flat to 7% higher than revenue for 2012.
Another factor is a warning letter that Intuitive received from the U.S. Food and Drug Administration on Wednesday. Earlier in the second quarter, the FDA conducted an on-site audit and issued four observations. At the time, Canaccord Genuity analyst Jason Mills talked with Intuitive management and said that the issues were “primarily administrative in nature” and that each issue was “thoroughly addressed.”
Now, though, the FDA is asking Intuitive Surgical (NASDAQ:ISRG) to take additional steps to address two of the four issues. CEO Gary Guthart says that the issues are addressable and that Intuitive is taking all necessary steps for resolution.