Intuitive Surgical: Growth Sliced for the Quarter

The da Vinci robotic system.
BSIP | UIG | Getty Images
The da Vinci robotic system.

This hasn't been a good couple of months for Intuitive Surgical.

It has faced a rising number of legal challenges based on allegations of death and injury tied to the use of its da Vinci surgical robot. It had its hands slapped by the Food and Drug Administration on a procedural matter. And, not long after the airing of CNBC's Investigations Inc. report,"The da Vinci Debate," Intuitive warned doctors of potentially dangerous flaws in one of its instruments.

Topping it off: After the close Monday, the Sunnyvale, CA. company, whose stock has been one of the hottest on Wall Street, announced that second quarter results would fall well below expectations, with income missing the mark by 10 percent and sales falling short of estimates by 9 percent.

Perhaps more disconcerting: Intuitive said overall sales in the quarter grew by just 7 percent, a profound slowdown at a company that quarter-after-quarter for the past two years has been turning in sales growth in averaging just below 25 percent..

As part of the disappointment, sales of machines—at more than $1.5 million each—dropped by 5 percent from the prior year.

Why the miss?

Intuitive cited several factors, "including, among other things, increased economic pressure on hospitals, which in turn caused some to defer da Vinci System purchases, and moderating growth in our benign gynecologic procedure."

Gynecological procedures, which started slowing in the first quarter, account for roughly half of all da Vinci procedures; a big part is benign.

In the first quarter the company attributed slowdown in benign gynecologic procedures to "slower than expected" seasonal patterns, lower hospital admissions and "noise," after the American Congress of Obstetricians and Gynecologists issued a strongly worded statement reminding doctors and patients that there are less costly and equally effective alternatives to robotic surgery.

In Monday's announcement Intuitive added a new culprit: "...a trend by payers toward encouraging conservative management and treatment in outpatient settings."

Whatever the reason, this much is certain what a difference two months makes: After all back in May, after meeting with management, Goldman Sachs analyst David Roman wrote a report headlined: "The Sun is Shining in Sunnyvale." Goldman today downgraded Intuitive to neutral from buy.

My take: There's a storm a brewin' on Wall Street.

—By CNBC's Herb Greenberg. Follow him on Twitter: @herbgreenberg and Google

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