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Reasons to Retain Intuitive Surgical Stock in 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 #3 (Hold) company have risen 43.6% year to date compared with the industry’s 9.2% growth. The S&P 500 Index has gained 19.9% 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 $173.79 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.
Upsides
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.
The company’s top line is expected to benefit from continued growth in procedure volume, improved price realization and increased system placements. Additionally, the launch of Intuitive Surgical’s latest robotic system, the da Vinci 5, has shown strong demand. Following its March release, 70 units were placed during the second quarter, indicating a sharp increase from just eight in the first quarter. Moreover, FDA approval for label expansion of the da Vinci X and Xi systems for radical prostatectomy is expected to further boost revenues.
During its second-quarter 2024 earnings call, Intuitive Surgical reported a 14% year-over-year increase in the installed base of da Vinci systems. The utilization rate, measured by procedures per system, increased 2% year over year.
The Ion system, launched in 2019, continues to perform well. The company placed 74 Ion systems in the second quarter, up from 59 in the prior-year quarter and 70 in the previous quarter. Procedures conducted with the Ion system surged 82%, reflecting the strong momentum in recent quarters. Furthermore, supply-chain improvements have alleviated constraints on Ion system sales, indicating the potential for higher placements and procedures in the coming 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 strong earnings performance was fueled by improvements in both gross and operating margins. Gross margin benefited from reduced costs associated with Intuitive Surgical’s latest platforms, Ion and SP, along with lower inventory reserves, cost savings on select purchased components, reduced freight expenses and better utilization of fixed overhead. Operating margin saw gains from ongoing leverage in enabling functions related to robotic surgery. The downward trend in operating expenses is expected to persist through the remainder of 2024. Intuitive Surgical anticipates its primary revenue driver, procedure volume, to grow 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 remained stable at $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.
Some better-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) , Baxter International Inc. (BAX - Free Report) and Boston Scientific Corporation (BSX - Free Report) .
DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 24.2%. Its shares have gained 54.2% compared with the industry’s 19.3% growth year to date.
Baxter, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 10%. BAX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.7%.
Baxter has gained 0.9% compared with the industry’s 14.2% growth year to date.
Boston Scientific, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 12.6%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.18%.
Boston Scientific’s shares have rallied 44.5% compared with the industry’s 14.2% growth year to date.
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Reasons to Retain Intuitive Surgical Stock in 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 #3 (Hold) company have risen 43.6% year to date compared with the industry’s 9.2% growth. The S&P 500 Index has gained 19.9% 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 $173.79 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.
Upsides
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.
The company’s top line is expected to benefit from continued growth in procedure volume, improved price realization and increased system placements. Additionally, the launch of Intuitive Surgical’s latest robotic system, the da Vinci 5, has shown strong demand. Following its March release, 70 units were placed during the second quarter, indicating a sharp increase from just eight in the first quarter. Moreover, FDA approval for label expansion of the da Vinci X and Xi systems for radical prostatectomy is expected to further boost revenues.
During its second-quarter 2024 earnings call, Intuitive Surgical reported a 14% year-over-year increase in the installed base of da Vinci systems. The utilization rate, measured by procedures per system, increased 2% year over year.
The Ion system, launched in 2019, continues to perform well. The company placed 74 Ion systems in the second quarter, up from 59 in the prior-year quarter and 70 in the previous quarter. Procedures conducted with the Ion system surged 82%, reflecting the strong momentum in recent quarters. Furthermore, supply-chain improvements have alleviated constraints on Ion system sales, indicating the potential for higher placements and procedures in the coming 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 strong earnings performance was fueled by improvements in both gross and operating margins. Gross margin benefited from reduced costs associated with Intuitive Surgical’s latest platforms, Ion and SP, along with lower inventory reserves, cost savings on select purchased components, reduced freight expenses and better utilization of fixed overhead. Operating margin saw gains from ongoing leverage in enabling functions related to robotic surgery. The downward trend in operating expenses is expected to persist through the remainder of 2024. Intuitive Surgical anticipates its primary revenue driver, procedure volume, to grow 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 remained stable at $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.
Baxter International Inc. Price
Baxter International Inc. price | Baxter International Inc. Quote
Stocks to Consider
Some better-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) , Baxter International Inc. (BAX - Free Report) and Boston Scientific Corporation (BSX - Free Report) .
DaVita, flaunting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 17.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 24.2%. Its shares have gained 54.2% compared with the industry’s 19.3% growth year to date.
Baxter, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 10%. BAX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.7%.
Baxter has gained 0.9% compared with the industry’s 14.2% growth year to date.
Boston Scientific, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 12.6%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.18%.
Boston Scientific’s shares have rallied 44.5% compared with the industry’s 14.2% growth year to date.