Reasons to Retain Intuitive Surgical 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 results in the last few quarters and its progress on the Artificial Intelligence front, is expected to contribute further. However, procedure adoption risks and stiff competition persist.

Shares of this Zacks Rank #3 (Hold) company have risen 23.8% year to date compared with the industry's 6.6% growth. The S&P 500 Index has gained 12.4% 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 $148.13 billion. It projects 16.1% 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 6.78%.

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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 has 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 its first-quarter 2024 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 2% 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 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 Q1 Results: ISRG's solid first-quarter results also buoy optimism. 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.Meanwhile, the absence of any significant disruptions from COVID during the first quarter aided results and may continue to boost procedure growth going forward.The gross margin and operating margin also improved. The declining trend in operating expenses is likely to continue for the rest of 2024 as well.

Downside

Supply Constraints Hurting Performance: Intuitive Surgical has been facing supply constraints for several instruments, leading to a loss of sales (as the company fails to meet demand). The ongoing geopolitical tensions with no resolution in the picture indicate that supply-chain issues are likely to persist, thereby continuing to hurt sales. The company expects da Vinci 5 system placements to be choppy in 2024 due to constrained supply, thereby hurting growth prospects for the device. Customers may delay orders and wait for adequate supply before buying the fifth-generation da Vinci 5. Although the extension of catheter life for the Ion modulation system should boost supply, catheter supply is likely to remain challenging.

Estimate Trend

In the past 60 days, the Zacks Consensus Estimate for 2024 earnings has improved 1.5% to $6.26 per share.

The consensus mark for the company's revenues is pegged at $8.01 billion, indicating a 12.5% 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 that have announced quarterly results are Align Technology, Inc. ALGN, Ecolab ECL and Boston Scientific Corporation BSX.

Align Technology, carrying a Zacks Rank #2 (Buy) at present, reported first-quarter 2024 adjusted earnings per share of $2.14, which beat the Zacks Consensus Estimate by 8.1%.

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

Ecolab, carrying a Zacks Rank of 2 at present, reported first-quarter 2024 EPS of $1.34, which beat the Zacks Consensus Estimate by 0.8%.

Ecolab has an estimated long-term growth rate of 14.3%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 1.3%.

Boston Scientific reported first-quarter 2024 adjusted EPS of 56 cents, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $3.86 billion surpassed the consensus estimate by 4.9%. The company currently carries a Zacks Rank of 2.

BSX has a long-term growth rate of 12.5%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 7.5%.

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