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Reasons to Add Intuitive Surgical (ISRG) to Your Portfolio Now
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Intuitive Surgical, Inc. (ISRG - Free Report) is well-poised for growth in the coming quarters, courtesy of its strength in robotics. The optimism, led by solid results in the last few quarters and its progress on the Artificial Intelligence (AI) front, is expected to contribute further. However, procedure adoption risks and stiff competition persist.
Shares of this Zacks Rank #1 (Strong Buy) company have risen 42.3% year to date compared with the industry’s 5.5% growth. The S&P 500 Index has gained 14.4% during the same time frame.
Intuitive Surgical, the pioneer of robotic-assisted surgery and a renowned provider of minimally invasive care, has a market capitalization of $167.45 billion. It projects 17.4% growth over the next five years.
The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 8.97%.
Image Source: Zacks Investment Research
Let’s delve deeper.
Strength in Robotics: We are upbeat about Intuitive Surgical’s robot-based da Vinci surgical system that enables minimally invasive surgery and reduces the trauma associated with open surgery. The minimally invasive nature of robotic surgeries should continue to drive patients from conventional methods to ISRG’s da Vinci systems and other platforms.
Continued growth in procedure volume, higher price realization for procedures and increased system placements are likely to drive the company’s top line going forward. Meanwhile, the launch of ISRG’s latest robotic system, da Vinci 5, reflected strong demand for the company’s new system. Following da Vinci 5’s launch in March, the company placed 70 units during the second quarter compared with eight during the first. Moreover, label expansion for da Vinci X and Xi specific to radical prostatectomy by the FDA should bring additional revenues going forward.
On its second-quarter 2024 earnings call, ISRG stated that its installed base of the da Vinci system grew approximately 14% year over year. The utilization of clinical systems in the field, measured by procedures per system, was up 2% from the prior-year quarter’s level.
Intuitive Surgical’s Ion modulation system has demonstrated robust numbers since its launch in 2019. The company placed 74 Ion systems compared with 59 last year and 70 in the previous quarter. The procedures conducted by the Ion system grew 82% during the second quarter, in sync with its strong trend over the past few quarters. The supply-chain issue restricting Ion system sales also improved during the period, implying potentially higher placements and procedures in the upcoming few quarters.
Progress on the AI Front: We are also positive about the growing adoption of minimally invasive robot-assisted surgeries, self-automated home-based care, the use of information technology for quick and improved patient care, and the shift of the payment system to a value-based model. These developments indicate the high prevalence of AI in the MedTech space.
Per management, the rise of medical mechatronics, powerful computing, improved sensing, microfabrication and molecular imaging has enabled new solutions to old problems. AI has been enhancing Intuitive Surgical’s product portfolio with clinical applications, diagnostic support, operational efficiency, electronic health record systems, practice workflows and supply-chain management.
Strong Q2 Results: ISRG’s solid second-quarter results also buoy optimism. The robust earnings performance was driven by improved gross and operating margins. The gross margin benefited from lower cost of products for ISRG’s latest platforms, Ion and SP, coupled with lower inventory reserves, cost reductions in certain purchase components, lower freight rates and leverage of fixed overhead. Operating margin improved from the ongoing benefit of planned leverage in enabling functions related to robotic surgery. The declining trend in operating expenses is likely to continue for the rest of 2024 as well. Intuitive Surgical expects its key top-line driver, procedure volume, to reflect growth of 14-17% in 2024.
Downside
Macro Challenges Continue: Intuitive Surgical may experience slower procedure growth during the second half, reflecting the increased effect of soft demand for bariatric procedures and increasing headwinds in Asia from prolonged physician strikes in Korea, delayed tenders and emerging domestic robotic systems in China.
The company expects the aforementioned factors to negatively impact its top-line growth by nearly three percentage point headwind in 2024. Meanwhile, any rise in supply-chain issues amid continuing geopolitical tensions may lead to choppy da Vinci 5 system placements in 2024. A challenging catheter supply may adversely impact Ion modulation system sales.
Estimate Trend
In the past 30 days, the Zacks Consensus Estimate for 2024 earnings has improved 6.5% to $6.67 per share.
The consensus mark for the company’s revenues is pegged at $8.10 billion, indicating a 13.7% improvement from the year-ago quarter’s reported number.
DaVita has an estimated long-term growth rate of 17.5%. DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 24.2%.
DaVita’s shares have risen 39.2% year to date compared with the industry’s 11% growth.
Aspen Technology has an estimated long-term growth rate of 13.1%. AZPN’s earnings surpassed estimates in two of the trailing four quarters and missed the same twice, the average surprise being 4.24%.
Shares of Aspen Technology have lost 3.1% year to date against the industry’s 9.2% growth.
Universal Health Services has an estimated long-term growth rate of 19%. UHS' earnings surpassed estimates in each of the trailing four quarters, the average surprise being 14.58%.
The company’s shares have risen 44.7% year to date compared with the industry’s 34.9% growth.
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Reasons to Add Intuitive Surgical (ISRG) to Your Portfolio Now
Intuitive Surgical, Inc. (ISRG - Free Report) is well-poised for growth in the coming quarters, courtesy of its strength in robotics. The optimism, led by solid results in the last few quarters and its progress on the Artificial Intelligence (AI) front, is expected to contribute further. However, procedure adoption risks and stiff competition persist.
Shares of this Zacks Rank #1 (Strong Buy) company have risen 42.3% year to date compared with the industry’s 5.5% growth. The S&P 500 Index has gained 14.4% during the same time frame.
Intuitive Surgical, the pioneer of robotic-assisted surgery and a renowned provider of minimally invasive care, has a market capitalization of $167.45 billion. It projects 17.4% growth over the next five years.
The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 8.97%.
Image Source: Zacks Investment Research
Let’s delve deeper.
Strength in Robotics: We are upbeat about Intuitive Surgical’s robot-based da Vinci surgical system that enables minimally invasive surgery and reduces the trauma associated with open surgery. The minimally invasive nature of robotic surgeries should continue to drive patients from conventional methods to ISRG’s da Vinci systems and other platforms.
Continued growth in procedure volume, higher price realization for procedures and increased system placements are likely to drive the company’s top line going forward. Meanwhile, the launch of ISRG’s latest robotic system, da Vinci 5, reflected strong demand for the company’s new system. Following da Vinci 5’s launch in March, the company placed 70 units during the second quarter compared with eight during the first. Moreover, label expansion for da Vinci X and Xi specific to radical prostatectomy by the FDA should bring additional revenues going forward.
On its second-quarter 2024 earnings call, ISRG stated that its installed base of the da Vinci system grew approximately 14% year over year. The utilization of clinical systems in the field, measured by procedures per system, was up 2% from the prior-year quarter’s level.
Intuitive Surgical’s Ion modulation system has demonstrated robust numbers since its launch in 2019. The company placed 74 Ion systems compared with 59 last year and 70 in the previous quarter. The procedures conducted by the Ion system grew 82% during the second quarter, in sync with its strong trend over the past few quarters. The supply-chain issue restricting Ion system sales also improved during the period, implying potentially higher placements and procedures in the upcoming few quarters.
Progress on the AI Front: We are also positive about the growing adoption of minimally invasive robot-assisted surgeries, self-automated home-based care, the use of information technology for quick and improved patient care, and the shift of the payment system to a value-based model. These developments indicate the high prevalence of AI in the MedTech space.
Per management, the rise of medical mechatronics, powerful computing, improved sensing, microfabrication and molecular imaging has enabled new solutions to old problems. AI has been enhancing Intuitive Surgical’s product portfolio with clinical applications, diagnostic support, operational efficiency, electronic health record systems, practice workflows and supply-chain management.
Strong Q2 Results: ISRG’s solid second-quarter results also buoy optimism. The robust earnings performance was driven by improved gross and operating margins. The gross margin benefited from lower cost of products for ISRG’s latest platforms, Ion and SP, coupled with lower inventory reserves, cost reductions in certain purchase components, lower freight rates and leverage of fixed overhead. Operating margin improved from the ongoing benefit of planned leverage in enabling functions related to robotic surgery. The declining trend in operating expenses is likely to continue for the rest of 2024 as well. Intuitive Surgical expects its key top-line driver, procedure volume, to reflect growth of 14-17% in 2024.
Downside
Macro Challenges Continue: Intuitive Surgical may experience slower procedure growth during the second half, reflecting the increased effect of soft demand for bariatric procedures and increasing headwinds in Asia from prolonged physician strikes in Korea, delayed tenders and emerging domestic robotic systems in China.
The company expects the aforementioned factors to negatively impact its top-line growth by nearly three percentage point headwind in 2024. Meanwhile, any rise in supply-chain issues amid continuing geopolitical tensions may lead to choppy da Vinci 5 system placements in 2024. A challenging catheter supply may adversely impact Ion modulation system sales.
Estimate Trend
In the past 30 days, the Zacks Consensus Estimate for 2024 earnings has improved 6.5% to $6.67 per share.
The consensus mark for the company’s revenues is pegged at $8.10 billion, indicating a 13.7% improvement from the year-ago quarter’s reported number.
Intuitive Surgical, Inc. Price
Intuitive Surgical, Inc. price | Intuitive Surgical, Inc. Quote
Other Stocks to Consider
Some other top-ranked stocks in the broader medical space that have announced quarterly results are DaVita (DVA - Free Report) , Aspen Technology (AZPN - Free Report) and Universal Health Services (UHS - Free Report) , each sporting a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita has an estimated long-term growth rate of 17.5%. DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 24.2%.
DaVita’s shares have risen 39.2% year to date compared with the industry’s 11% growth.
Aspen Technology has an estimated long-term growth rate of 13.1%. AZPN’s earnings surpassed estimates in two of the trailing four quarters and missed the same twice, the average surprise being 4.24%.
Shares of Aspen Technology have lost 3.1% year to date against the industry’s 9.2% growth.
Universal Health Services has an estimated long-term growth rate of 19%. UHS' earnings surpassed estimates in each of the trailing four quarters, the average surprise being 14.58%.
The company’s shares have risen 44.7% year to date compared with the industry’s 34.9% growth.