For some, Intuitive Surgical's Q3 20% revenue jump isn't enough

Intuitive Surgical's ($ISRG) 2012 third-quarter revenue jumped 20%, the company disclosed. That's stellar news, right? Well, you would think. But investors reacted negatively, driving the company's stock price down more than 4% in after-hours trading, because the overall positive number masks a few blemishes. As predicted, the maker of da Vinci surgical robots and related devices and instruments faced a U.S. decline in procedures and slower European growth. Intuitive's stock price was at $511 before Wednesday trading began, even with the decline.

The numbers in detail: Intuitive booked $538 million in revenue during its fiscal 2012 third quarter, a 20% rise compared to the $447 million reported over the same period in 2011. Broken down, the company's instruments and accessories revenue soared to $218 million, a 24% jump compared to $176 million a year ago. The number of procedures also jumped 22%, thanks to growth among gynecologic and general surgery clients. But it could have grown even more, challenged by slower procedure growth in Europe and a dip in U.S. da Vinci-related prostatectomy procedures. Systems revenue, by the way, jumped 17%, hitting $232 million during the quarter, versus $199 million in 2011's Q3. Translated: The company sold a lot more da Vinci Surgical systems.

Even Intuitive's cash climbed to new heights. The company ended its fiscal 2013 third quarter with $2.7 billion in cash, equivalents and investments on hand, up $70 million, and Intuitive's leadership channeled $170 million back into the company with a massive share repurchase.

But observers, investors and the company itself had expected even bigger accomplishments. Intuitive's president and CEO Gary Guthart acknowledged as much in the company's earnings statement noting that "procedures came in below our expectations, driven by conditions in Europe and changes in prostate cancer detection and treatment."

Seeking Alpha contributor Alan Brochstein explain in an analysis that investors punished Intuitive (as they did in Q2), even with stellar financial results, because "procedure growth is ultimately the lifeblood of the company" and they took notice that it came in "below expectations."

"Investors hate when trends break, and that trend is broken," he says in the Seeking Alpha piece. Driving home the point even further is the dip in prostate surgeries, which Brochstein noted dropped 20% from a year ago, in part, because U.S. protocols for prostate cancer now place a greater focus on "watchful waiting" over "immediate surgery." Prostatectomy procedure softness drove the company's stock during the second quarter as well, even as Intuitive's revenue grew 26% in its fiscal 2012 second-quarter, hitting $537 million.

- read the release
- here's Seeking Alpha's take

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