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3 Must-Buy Stocks on the Right Side of the Earnings Divide

How to play polarizing earnings-season results

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Intuitive Surgical (NASDAQ:ISRG) also announced solid earnings performance for the fourth quarter. Total sales climbed 28% year-over-year to $497 million, thanks to increased sales of its patented da Vinci surgical system. This trumped the consensus sales estimate of $483.7 million by 3%. Over the same period, net income jumped 25% to $151 million, or $3.75 per share. Street analysts forecast earnings of just $3.35 per share, so the company posted a 12% earnings surprise.

The only downside I see to the report is news that European hospitals are becoming more careful with their spending, so sales have slowed down a bit on that front. However, the company remains dedicated to expanding in international markets, and its hard work is paying off in countries like Korea. I’m not overly concerned with this. The da Vinci Surgical system is one of a kind, and the company is smart to focus on emerging Asian markets.

The other thing to note about this stock is that it has been on an incredible run. So the dip we saw after earnings is just a case of normal profit-taking, and if you look at ISRG’s chart, you’ll notice that this stock tends to gain tremendous ground and then recede briefly when earnings are released. With that in mind, I reiterate my “strong buy” recommendation. Continue to buy shares of this moderately aggressive stock below $484.

UnitedHealth Group (NYSE:UNH) revealed stellar operating performance in both the fourth quarter and for full-year 2011. In particular, its Optum segment, which focuses on population health management and care delivery, grew sales by 23% in Q4 2011 compared with Q4 2010. OptumHealth now serves nearly one in five Americans. The company also served an additional 170,000 people in the fourth quarter, helping to boost the company’s top- and bottom-lines.

Total fourth-quarter sales rose 8% to $25.92 billion, topping analyst estimates of $25.7 billion. Over the same period, net earnings advanced 22% to $1.26 billion, or $1.71 per share. The Street forecast earnings of $1.03 per share, so UnitedHealth Group posted a 14% earnings surprise. You should continue to buy this conservative stock below $56.

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