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Here's Why You Should Retain Intuitive Surgical (ISRG) Stock

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Intuitive Surgical, Inc. (ISRG - Free Report) is well-poised for growth on improving adoption of da Vinci Surgical System and strong international presence. An increase in output costs remains a headwind.

Shares of this Zacks Rank #3 (Hold) company have gained 19.6% against the industry’s decline of 2.7% in a year’s time. The S&P 500 Index has rallied 23.7% in the same time frame.

ISRG — with a market capitalization of $115.85 billion — designs, manufactures, and markets the da Vinci surgical system along with related instruments and accessories. The da Vinci surgical system is an advanced robot-assisted surgical system. It anticipates earnings to improve 10% over the next five years. It beat earnings estimates in three of the trailing four quarters and missed once, the average surprise being 18.6%.

What’s Favoring the Stock?

Intuitive Surgical’s robot-based da Vinci surgical system enables minimally-invasive surgery that reduces risks associated with open surgery. The company continues to gain from this system, which in turn bolsters overall performance.

In the first half of 2021, da Vinci procedures improved significantly and the momentum sustained in the third quarter, with Intuitive Surgical witnessing growth of 20%. Intuitive Surgical placed 6,525 da Vinci surgical systems in the third quarter, with the installed base growing 11% year over year. On the back of stronger recovery in procedures so far, the company currently projects procedure growth of 27-29% in 2021 (narrowed from the previously guided range of 27-30%) due to the impact of the Delta variant and third-quarter performance.

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With respect to digital capabilities, the company remains focused on improving the ecosystem. During the second quarter, Intuitive Surgical continued to engage customers in data analytics and opportunity analysis for surgical programs, which is the cornerstone of its Your Data, Your Truth analytics efforts. The company has made advancements with the launch of My Intuitive, which is a mobile app enabling surgeons to manage their da Vinci experience and training, log into da Vinci systems, and view operative data from the palm of their hand. It has been of great help amid this public health crisis.

During the second quarter, the company introduced this app to the first users in Europe. Digital learning programs continue to be a crucial part of its overall learning initiatives. Cumulatively, these programs trained above 2,200 care team members in the second quarter, thereby demonstrating organizational strength and localizing programs, and responding with agility to pandemic-driven demand.

Intuitive Surgical is gradually gaining prominence in markets outside the United States. For third-quarter 2021, revenues outside the United States totaled $451.1 million, up 35.1% on a year-over-year basis. This was driven by substantial improvement (30%) in procedure volume on account of higher prostatectomy procedures and earlier-stage growth in kidney cancer procedures, general surgery, gynecology, and thoracic surgery. Outside the United States, the company placed 109 systems in the third quarter compared with 79 in the prior-year period. Of these, 47 were in Europe, 20 in Japan and 17 in China.

What’s Weighing on It?

The COVID-19 pandemic adversely affected the global supply of semiconductors and other materials utilized in Intuitive Surgical’s products. Although the company has been making every effort to secure the supply required for ensuring the fulfillment of consumer demand, global shortages might result in higher output costs or delay in production.

Estimates Trend

Intuitive Surgical has been witnessing an upward estimate revision trend for 2021. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved north by 0.4% to $4.94 per share.

The Zacks Consensus Estimate for fourth-quarter 2021 revenues is pegged at $1.51 billion, suggesting growth of 13.7% from the year-ago reported number.

Stocks to Consider

Some better-ranked stocks in the broader medical space include AMN Healthcare Services, Inc. (AMN - Free Report) , Abiomed, Inc. and Laboratory Corporation of America Holdings (LH - Free Report) .

AMN Healthcare surpassed earnings estimates in each of the trailing four quarters, the average surprise being 19.5%. The company currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare’s long-term earnings growth rate is estimated at 16.2%. The company’s earnings yield of 5.5% compares favorably with the industry’s 0.8%.

Abiomed beat earnings estimates in each of the trailing four quarters, the average surprise being 5.8%. The company currently carries a Zacks Rank #2.

Abiomed’s long-term earnings growth rate is estimated at 20%. The company’s earnings yield of 1.2% compares favorably with the industry’s (3.6%).

Laboratory Corporation surpassed earnings estimates in each of the trailing four quarters, the average surprise being 25.7%. The company currently sports a Zacks Rank #1.

Laboratory Corporation’s long-term earnings growth rate is estimated at 10.6%. The company’s earnings yield of 9.4% compares favorably with the industry’s 3.4%.


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