What to look out for

Market expectations are that Intuitive Surgical, Inc. will report a decrease in earnings year-over-year on higher revenues for its quarter ending December 2022. While this consensus outlook is crucial in evaluating the company’s earnings picture is important, it is also a strong factor that could influence the stock price for the near term. This is because of how actual results compare with these estimates.

If the key numbers are better that expectations, then this earnings report could help the stock move higher. If they do not meet expectations, the stock might move lower.

Although management will discuss business conditions on the earnings conference, which will most likely determine the sustainability for the immediate price change as well as future earnings expectations and earnings estimates, it is worthwhile to have a handicapping perspective into the chances of a positive surprise in EPS.

Zacks Consensus Estimate

In its upcoming report, the company will post quarterly earnings at $1.26 per share. This is a change of -3.1% from last year.

Revenues are expected increase 6.9% to $1.66 billion from the year-ago quarter.

Trend in Estimate Revisions

Over the past 30 days, the consensus EPS estimate has remained the same. This is essentially due to the fact that all of the analysts covering the quarter have collectively reassessed these initial estimates during this period.

Investors need to remember that estimates may be revised by different covering analysts in a way that does not always reflect in aggregate change.

Earnings Whisper

An estimate revision ahead of a company’s earnings release can provide clues as to the business conditions for that period. This insight is the heart of our proprietary surprise prediction model, the Zacks Earnings ESP.

The Zacks Earnings ESP compared the Most Accurate Estimate and the Zacks Consensus Estimate. The Most Accurate Estimate refers to a more recent Zacks Consensus EPS estimation. This is because analysts who revise their estimates before earnings releases have the most recent information. It could be that this information may be more accurate than what others contributed to the consensus.

The model’s predictive power is therefore positive or negative Earnings ESP readings. This indicates that the earnings estimates could be off by a significant amount. Positive ESP readings are not affected by the model’s predictive ability.

An earnings beat is predicted by a positive Earnings ESP, especially when it’s combined with a Zacks Rank #1 or #2 (Strong Buy), 3 (Hold), or 3 (Buy). This combination produces a positive surprise almost 70% of the times. A solid Zacks Rank increases the predictive power for Earnings ESP.

A negative Earnings ESP reading does not necessarily indicate an earnings miss. It is not possible to predict an earnings beat for stocks with negative Earnings EESP readings and/or Zacks Rankings of 4 (Sell), or 5 (Strong Buy).

How have the numbers stacked up for Intuitive Surgical, Inc.

Intuitive Surgical, Inc.’s Most Accurate estimate is lower than Zacks Consensus Estimate, indicating analysts have become bearish on the company’s earnings prospects. The Earnings ESP has been lowered to -0.69%.

The stock, on the other hand has a Zacks Rank #3.

This combination makes it difficult, if not impossible, to conclude that Intuitive Surgical, Inc. will surpass the consensus EPS estimation.

Is Earnings History a Surprise?

Analysts often look at past consensus estimates when estimating a company’s future earnings. For gauging the impact of the past surprise history on the next number, it is worth looking at it.

Intuitive Surgical, Inc. had been expected to report earnings of $1.10 per shares for its last reported quarter. Instead, the company actually posted earnings of $1.19 per share, surprising +8.18%.

The company beat consensus EPS estimates by three times in the past four quarters.

Bottom line

A stock’s ability to move higher or lower may not depend on whether it has an earnings beat or miss. Stocks can lose ground even if earnings beats are achieved. This is because investors may be disappointed by other factors. Unexpected catalysts can also help stocks gain even if earnings are below expectations.

However, it is possible to increase your chances of success by betting on stocks that exceed earnings expectations. Before each quarter’s quarterly release, it is worth checking the Earnings ESP of a company and Zacks Rank. Our Earnings ESP Filter will help you find the best stocks to purchase or sell before they report.

Intuitive Surgical, Inc. This stock doesn’t seem to be a strong earnings-beat candidate. Investors should be aware of other factors before betting on this stock, or staying away from it, ahead of its earnings release.

Keep up-to-date with future earnings announcements using the Zacks Earnings Calendar.

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