Reasons to Retain Intuitive Surgical (ISRG) in Your Portfolio
Intuitive Surgical, Inc. ISRG is well poised for growth in the coming quarters, courtesy of its strength in robotics. The optimism, led by solid 2023 results and its progress on the artificial intelligence (AI) front, is expected to contribute further. Risks pertaining to procedure adoption and stiff competition persist.
Shares of this currently Zacks Rank #3 (Hold) company have risen 16.1% so far this year compared with the industry’s 6.8% increase. The S&P 500 Index has gained 9.3% during the same time frame.
Intuitive Surgical, the pioneer of robotic-assisted surgery and the renowned provider of minimally invasive care, has a market capitalization of $139.68 billion. It projects 13.1% 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 5.83%.
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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 da Vinci System is powered by robotic technology that has provided the company with solid exposure to medical mechatronics, robotics and AI for the healthcare space. The company gained FDA clearance for its da Vinci 5 fifth-generation multiport robotic system earlier this month. The system is believed to be the smoothest and most accurate device in ISRG’s portfolio.
On the fourth-quarter 2023 earnings call, the company 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 15% from the prior-year quarter’s level.
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 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 Q4 Results: ISRG’s solid fourth-quarter 2023 results also buoy optimism. Revenues were primarily driven by continued growth in the company’s da Vinci procedure volume. Intuitive Surgical has also been raising the price of procedures to fight inflationary pressure that also aided sales growth.Meanwhile, the absence of any significant disruptions from COVID-19 during the fourth quarter seems promising. This may continue to boost procedure growth going forward.Although the gross margin contracted, the operating margin improved during the fourth quarter. The declining trend in operating expenses is likely to continue in 2024 as well.
Downside
Risk of Procedure Adoption: Procedure adoption growth takes time, as each procedure needs to gain credibility. Furthermore, the wide use of the company’s products requires the training of surgical teams. Market acceptance could be delayed by the time required to complete such training.
Estimate Trend
In the past 30 days, the Zacks Consensus Estimate for 2024 earnings has remained unchanged at $6.18 per share.
The consensus mark for the company’s 2024 revenues is pegged at $7.98 billion, indicating an 11.9% improvement from the year-ago quarter’s reported number.
Intuitive Surgical, Inc. Price
Intuitive Surgical, Inc. price | Intuitive Surgical, Inc. Quote
Stocks to Consider
Some better-ranked stocks in the broader medical space are Cardinal Health CAH, Stryker SYK and DaVita DVA. While Cardinal Health and Stryker carry a Zacks Rank #2 (Buy) each, DaVita sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cardinal Health’s stock has gained 55.8% in the past year. Earnings estimates for Cardinal Health have risen from $7.28 to $7.29 in fiscal 2024 and from $8.02 to $8.04 in fiscal 2025 in the past 30 days.
CAH’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 15.6%. In the last reported quarter, it posted an earnings surprise of 16.67%.
Estimates for Stryker’s 2024 earnings per share have remained constant at $11.86 in the past 30 days. Shares of the company have moved 26.2% upward in the past year compared with the industry’s rise of 5.2%.
SYK’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.09%. In the last reported quarter, it delivered an earnings surprise of 5.81%.
Estimates for DaVita’s 2024 earnings per share have moved from $8.97 to $9.23 in the past 30 days. Shares of the company have gained 74.7% in the past year compared with the industry’s 22% rise.
DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 35.57%. In the last reported quarter, it delivered an earnings surprise of 22.22%.
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