Intuitive Surgical Stock Gains 20% YTD: Here's Why

Intuitive Surgical ISRG witnessed strong momentum in the year-to-date period. Shares of the company have gained 20% compared with 8.2% growth of the industry in the same time frame. The S&P 500 Composite has risen 11.5% during the same period.

With healthy fundamentals and strong growth opportunities, this Zacks Rank #3 (Hold) company appears to be a solid wealth creator for its investors at the moment. ISRG's earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters with an average surprise of 6.78%.

Headquartered in Sunnyvale, CA, Intuitive Surgical designs, manufactures and markets the da Vinci surgical system, Ion endoluminal system and related instruments and accessories. The da Vinci surgical system is an advanced robot-assisted surgical system. The surgical system comprises a surgeon's console, patient-side cart, 3-D vision system, da Vinci Skills Simulator and Firefly Fluorescence Imaging. The company operates through three segments —Instruments and Accessories, Systems and Services.

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Catalysts Driving Growth

ISRG's stock price is on the rise, driven by both robust Ion procedure growth and sustained growth in its da Vinci treatment volume. In March 2024, ISRG announced the FDA 510(k) clearance for its da Vinci 5 fifth-generation multiport robotic system. This clearance is likely to boost Intuitive Surgical's business and generate additional revenues. On the first quarter of 2024 earnings call, ISRG reported that the number of installed da Vinci systems increased 14% year over year. The utilization of clinical systems in the field, measured by procedures per system, increased 2% from the prior-year quarter's level.

ISRG's solid first-quarter results are likely to have aided in surging the stock's price. Revenues were primarily driven by continued growth in the company's da Vinci procedure volume. Intuitive Surgical has been raising the price of procedures to fight inflationary pressure, which also aided sales growth and drove the stock's price.

Intuitive Surgical generated a gross profit of $1.28 billion in the first quarter, up 12.1% year over year. As a percentage of revenues, the gross margin was 67.6%, up approximately 40 bps from the prior-year quarter. Adjusted operating income totaled $630 million, up 17.8% year over year. The figure was higher than the Zacks Consensus Estimate of $617 million. As a percentage of revenues, the operating margin was 33.3%, up approximately 180 bps from the prior-year quarter's figure. However, the expansion of margins boosted the stock's price.

Risk Factors

Intuitive Surgical faced supply constraints for several of its instruments, leading to a loss of sales as the company failed to meet demand due to ongoing geopolitical tensions. This has negatively impacted the company's revenues, which is likely to continue in the future. Also, the prices of materials remain elevated from historical levels due to market demand or production-related cost inflation.

A Look at Estimates

Intuitive Surgical's earnings per share in 2024 and 2025 are expected to grow 9.6% and 16.9% to $6.26 and $7.32 on a year-over-year basis, respectively. The Zacks Consensus Estimate for EPS has remained flat for 2024 and 2025 in the past 30 days.

Revenues for 2024 and 2025 are anticipated to rise 12.5% and 15.4% to $8.01 billion and $9.26 billion, respectively, on a year-over-year basis.       

Intuitive Surgical, Inc. Price

Intuitive Surgical, Inc. price | Intuitive Surgical, Inc. Quote

Stocks to Consider

Some better-ranked stocks in the broader medical space that have announced quarterly results are Align Technology, Inc. ALGN, Ecolab ECL and Boston Scientific Corporation BSX.

Align Technology, carrying a Zacks Rank of 2 (Buy), reported first-quarter 2024 adjusted EPS of $2.14, beating the Zacks Consensus Estimate by 8.1%. Revenues of $997.4 million outpaced the consensus mark by 2.6%.

Align Technology has a long-term estimated growth rate of 6.9%. ALGN's earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 5.9%.

Ecolab, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 13.3%. ECL's earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 1.7%.

Ecolab's shares have rallied 33.8% against the industry's 9.3% decline in the past year.

Boston Scientific reported first-quarter 2024 adjusted EPS of 56 cents, beating the Zacks Consensus Estimate by 9.8%. Revenues of $3.86 billion surpassed the Zacks Consensus Estimate by 4.9%. It currently carries a Zacks Rank #2.

Boston Scientific has a long-term estimated growth rate of 12.5%. BSX's earnings surpassed estimates in all the trailing four quarters, the average surprise being 7.5%.

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