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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 the increasing adoption of the da Vinci Surgical System and strong international presence. Although the company faces inflationary headwinds, its improved margins in the third quarter and lower-than-previously-expected operating expense growth boost sentiments.
Shares of this Zacks Rank #3 (Hold) company have dropped 23.8% compared with the industry’s decline of 26.7% so far this year. The S&P 500 Index has declined 18.8% in the same period.
ISRG — with a market capitalization of $95.63 billion — designs, manufactures and markets the da Vinci surgical system, and related instruments and accessories. The da Vinci surgical system is an advanced robot-assisted surgical system.
The company anticipates earnings to improve 12% over the next five years. It beat earnings estimates in three of the trailing four quarters and missed the same once, the average surprise being 3.41%.
Image Source: Zacks Investment Research
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 the overall performance.
The company shipped 305 da Vinci Surgical Systems in the quarter, taking the total installed base to 7,364 da Vinci surgical systems by the end of the third quarter of 2022. This reflected growth of 12.9% year over year. For 2022, the company projects procedure growth of 17-18%.
For digital capabilities, ISRG remains focused on improving the ecosystem. On the third-quarter 2022 earnings call, the company stated that the My Intuitive app community continued to increase on a year-over-year basis.
The My Intuitive app is currently available in several countries, including the United States, Japan, Germany, France, the U.K. and Ireland and Switzerland, with more launches for the upcoming quarters. The app enables surgeons to manage their da Vinci experience, log into da Vinci systems, manage their training and view their operative data from the palm of their hand.
Intuitive Surgical’s Ion system is also experiencing strong uptake as the installed base increased to approximately 254 systems in the third quarter compared with the installed base of approximately 98 systems in the year-ago period. The system expands the company’s service beyond surgery into diagnostic procedures.
Intuitive Surgical’s teams in Israel and the United States have developed the Intuitive Hub with its Orpheus technology. Intuitive Hub — a unified hardware and software solution for the operating room — allows OR teams to capture, edit and share video clips from clinical procedures and partner virtually by utilizing existing workflows and intuitive systems.
The Intuitive Hub grew 21% from the third quarter of last year. Moreover, software updates to the Hub installed base improved usability and enabled telepresence.
The FDA clearance earlier this year for integrating mobile cone-beam CT imaging technology with its minimally-invasive, robotic-assisted bronchoscopy system, Ion Endoluminal System, is likely to benefit ISRG. The technology will allow the biopsy of small and difficult-to-access lesions in the lung and the biopsy of the peripheral lung and provide the necessary stability for precision in a biopsy.
In the third quarter of 2022, outside the United States, revenues totaled $474.4 million, up 5.2% on a year-over-year basis. This was driven by substantial growth in the procedure volume. Outside the United States, Intuitive Surgical placed 130 systems in the third quarter compared with 109 in the prior-year quarter. Of these, 54 were in Europe, 32 in Japan and 17 in China.
Meanwhile, Intuitive Surgical’s gross margin and adjusted operating margin improved year over year in the third quarter. The expansion in the gross and operating margins buoys optimism. The company now expects its pro-forma operating expense to grow 21%-23%, lower than the previous guidance of 23%-25%.
The company also expects operating expenses to decline in 2023. A decrease in the expense guidance amid macro headwinds like inflation buoys optimism for the stock. However, intense competition in the global MedTech space remains a concern.
What’s Weighing on ISRG?
The pandemic adversely impacted the global supply of semiconductors and other materials utilized in Intuitive Surgical’s products. Although the company has been undertaking efforts to secure the supply required to fulfill consumer demand, global shortages might result in higher output costs or a delay in production.
The Zacks Consensus Estimate for 2023 revenues is pegged at $6.97 billion, suggesting growth of 11.7% from the year-ago reported number, while the same for earnings stands at $5.34 per share, indicating a rise of 13.5%. Earnings estimates for 2023 have improved 1.9% in the past 60 days.
The Zacks Consensus Estimate for ShockWave Medical’s earnings per share has been stable at $2.57 for 2022 and has risen from $3.42 to $3.56 for 2023 in the past 60 days. SWAV has rallied 43.1% so far this year. ShockWave Medical delivered an earnings surprise of 146.1%, on average, in the last four quarters.
Estimates for Merit Medical Systems have improved from earnings of $2.47 to $2.57 for 2022 and $2.77 to $2.82 for 2023 in the past 60 days. MMSI stock has risen 18.3% so far this year. Merit Medical Systems delivered an earnings surprise of 25.35%, on average, in the last four quarters.
HealthEquity’s earnings per share estimates have increased from $1.28 to $1.29 for fiscal 2023 and $1.76 to $1.79 for fiscal 2024 in the past 60 days. HQY has rallied 42.4% so far this year. HealthEquity’s earnings are anticipated to improve 26.3% over the next five years.
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Here's Why You Should Retain Intuitive Surgical (ISRG) Stock
Intuitive Surgical, Inc. (ISRG - Free Report) is well-poised for growth on the increasing adoption of the da Vinci Surgical System and strong international presence. Although the company faces inflationary headwinds, its improved margins in the third quarter and lower-than-previously-expected operating expense growth boost sentiments.
Shares of this Zacks Rank #3 (Hold) company have dropped 23.8% compared with the industry’s decline of 26.7% so far this year. The S&P 500 Index has declined 18.8% in the same period.
ISRG — with a market capitalization of $95.63 billion — designs, manufactures and markets the da Vinci surgical system, and related instruments and accessories. The da Vinci surgical system is an advanced robot-assisted surgical system.
The company anticipates earnings to improve 12% over the next five years. It beat earnings estimates in three of the trailing four quarters and missed the same once, the average surprise being 3.41%.
Image Source: Zacks Investment Research
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 the overall performance.
The company shipped 305 da Vinci Surgical Systems in the quarter, taking the total installed base to 7,364 da Vinci surgical systems by the end of the third quarter of 2022. This reflected growth of 12.9% year over year. For 2022, the company projects procedure growth of 17-18%.
For digital capabilities, ISRG remains focused on improving the ecosystem. On the third-quarter 2022 earnings call, the company stated that the My Intuitive app community continued to increase on a year-over-year basis.
The My Intuitive app is currently available in several countries, including the United States, Japan, Germany, France, the U.K. and Ireland and Switzerland, with more launches for the upcoming quarters. The app enables surgeons to manage their da Vinci experience, log into da Vinci systems, manage their training and view their operative data from the palm of their hand.
Intuitive Surgical’s Ion system is also experiencing strong uptake as the installed base increased to approximately 254 systems in the third quarter compared with the installed base of approximately 98 systems in the year-ago period. The system expands the company’s service beyond surgery into diagnostic procedures.
Intuitive Surgical’s teams in Israel and the United States have developed the Intuitive Hub with its Orpheus technology. Intuitive Hub — a unified hardware and software solution for the operating room — allows OR teams to capture, edit and share video clips from clinical procedures and partner virtually by utilizing existing workflows and intuitive systems.
The Intuitive Hub grew 21% from the third quarter of last year. Moreover, software updates to the Hub installed base improved usability and enabled telepresence.
The FDA clearance earlier this year for integrating mobile cone-beam CT imaging technology with its minimally-invasive, robotic-assisted bronchoscopy system, Ion Endoluminal System, is likely to benefit ISRG. The technology will allow the biopsy of small and difficult-to-access lesions in the lung and the biopsy of the peripheral lung and provide the necessary stability for precision in a biopsy.
In the third quarter of 2022, outside the United States, revenues totaled $474.4 million, up 5.2% on a year-over-year basis. This was driven by substantial growth in the procedure volume. Outside the United States, Intuitive Surgical placed 130 systems in the third quarter compared with 109 in the prior-year quarter. Of these, 54 were in Europe, 32 in Japan and 17 in China.
Meanwhile, Intuitive Surgical’s gross margin and adjusted operating margin improved year over year in the third quarter. The expansion in the gross and operating margins buoys optimism. The company now expects its pro-forma operating expense to grow 21%-23%, lower than the previous guidance of 23%-25%.
The company also expects operating expenses to decline in 2023. A decrease in the expense guidance amid macro headwinds like inflation buoys optimism for the stock. However, intense competition in the global MedTech space remains a concern.
What’s Weighing on ISRG?
The pandemic adversely impacted the global supply of semiconductors and other materials utilized in Intuitive Surgical’s products. Although the company has been undertaking efforts to secure the supply required to fulfill consumer demand, global shortages might result in higher output costs or a delay in production.
Intuitive Surgical, Inc. Price
Intuitive Surgical, Inc. price | Intuitive Surgical, Inc. Quote
Estimates
The Zacks Consensus Estimate for 2023 revenues is pegged at $6.97 billion, suggesting growth of 11.7% from the year-ago reported number, while the same for earnings stands at $5.34 per share, indicating a rise of 13.5%. Earnings estimates for 2023 have improved 1.9% in the past 60 days.
Stocks to Consider
Some better-ranked stocks from the broader medical space are ShockWave Medical , Merit Medical Systems (MMSI - Free Report) and HealthEquity (HQY - Free Report) , each carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for ShockWave Medical’s earnings per share has been stable at $2.57 for 2022 and has risen from $3.42 to $3.56 for 2023 in the past 60 days. SWAV has rallied 43.1% so far this year. ShockWave Medical delivered an earnings surprise of 146.1%, on average, in the last four quarters.
Estimates for Merit Medical Systems have improved from earnings of $2.47 to $2.57 for 2022 and $2.77 to $2.82 for 2023 in the past 60 days. MMSI stock has risen 18.3% so far this year. Merit Medical Systems delivered an earnings surprise of 25.35%, on average, in the last four quarters.
HealthEquity’s earnings per share estimates have increased from $1.28 to $1.29 for fiscal 2023 and $1.76 to $1.79 for fiscal 2024 in the past 60 days. HQY has rallied 42.4% so far this year. HealthEquity’s earnings are anticipated to improve 26.3% over the next five years.