Robotic-assisted surgery device maker Intuitive Surgical has announced an acceleration of its $1 billion share buyback program from Goldman, Sachs & Co. in an effort to prop up its dwindling stock price.
The embattled Sunnyvale, CA–based Intuitive Surgical had a rough first quarter. Revenue for the quarter was down 24 percent year-on-year, and lawsuits are mounting.
In the press release announcing the accelerated share repurchase program, the company reports that it anticipates that a majority of the shares repurchased from Goldman will be received and retired within two weeks. The remaining shares, if any, under the program will be received and retired no later than early November 2014.
"Our decision to repurchase $1 billion in Intuitive Surgical stock on an accelerated basis reflects our long-term view of the value our company can bring to patients, surgeons and hospitals," Gary S. Guthart, MD, Intuitive's president and CEO said in the release.
According to Marketwatch, Intuitive had bought back $779 million last July. At that time, Marketwatch's Russ Britt wrote that S&P Capital analyst Phillip Seligman had said in a note to clients, "While the buyback should benefit [earnings per share], it does not help the fundamentals, in our view, and we expect U.S. sales trends to be soft for the foreseeable future."
Echoing the immediate result of the earlier buyback, Intuitive's share price enjoyed a small uptick. But the stock is still off almost 40 percent from its all-time high, achieved at the end of April 2012.
Ben Levisohn, writing for Barrons, quoted ISI Group's Vijay Kumar, who calls the buyback "huge for investors." Kumar continues, "Recall that the company reiterated its commitment to grow OpEx by 12–15 percent … while lowering procedure estimates by ~500bps at the mid-point, implying its belief in new product opportunity and willingness to spend. We had urged management … to back this belief by share repurchases and send a proactive message to the Street. We are encouraged to see this announcement, and would further note that our recent channel checks on the new Xi product has been very positive."
Kumar also said that he expects Intuitive's share price to be up "at least 7 percent" but, thus far at least, the market is saying more like 2 percent.
Stephen Levy is a contributor to Qmed and MPMN.
