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Here's Why You Should Retain Intuitive Surgical (ISRG) Stock

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Intuitive Surgical, Inc. (ISRG - Free Report) is well-poised for growth on the improving adoption of da Vinci Surgical System and strong international presence. However, an increase in output costs remains a headwind.

Shares of this Zacks Rank #3 (Hold) company have lost 22.9% compared with the industry’s decline of 17.6% in a year’s time. The S&P 500 Index has fallen 2.9% in the same time frame.

ISRG — with a market capitalization of $75.69 billion — designs, manufactures and markets the da Vinci surgical system along with related instruments and accessories. The da Vinci surgical system is an advanced robot-assisted surgical system. It anticipates earnings to improve 10.6% over the next five years. It beat earnings estimates in three of the trailing four quarters and matched once, the average surprise being 7.8%.

What’s Favoring the Stock?

Intuitive Surgical’s robot-based da Vinci surgical system enables minimally-invasive surgery that reduces risks associated with open surgery. The company continues to gain from this system, which in turn bolsters overall performance.

Intuitive Surgical placed 6,920 da Vinci surgical systems in the first quarter of 2022, with the installed base growing 12.7% year over year. For 2022, the company now projects procedure growth of 12-16% (up from the prior range of 11-15%), and this estimate takes into account the uncertainty related to the pandemic.

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With respect to digital capabilities, the company remains focused on improving the ecosystem. Per the first-quarter 2022 earnings call, My Intuitive app (which enables surgeons to manage their da Vinci experience, log into da Vinci systems, manage their training, and view their operative data from the palm of their hand) community tripled on a year-over-year basis. The app is currently available in the United States, Japan, Germany, France, the U.K. and Ireland, and Switzerland, with launches set for Italy, Spain, and India in the second quarter.

Intuitive Surgical’s teams in Israel and the United States have developed Intuitive Hub on the back of its Orpheus technology. Intuitive Hub — a unified hardware and software solution for the operating room — allows OR teams to capture, edit, and share video clips from clinical procedures and partner virtually by utilizing existing workflows and intuitive systems. In the first quarter, the company introduced an upgraded interface to da Vinci systems that enables automated video capture with integrated procedure annotation for key events, thereby building convenient video storage and review for event cases.

In the first quarter of 2022, outside the United States, revenues totaled $522.9 million, up 17.6% on a year-over-year basis. This was driven by substantial growth in procedure volume. Outside the United States, Intuitive Surgical placed 125 systems in the first quarter compared with 108 in the prior-year quarter. Of these, 78 were in Europe, 19 in Japan and nine in China.

What’s Weighing on It?

The COVID-19 pandemic adversely affected the global supply of semiconductors and other materials utilized in Intuitive Surgical’s products. Although the company has been making every effort to secure the supply required to ensure the fulfillment of consumer demand, global shortages might result in higher output costs or delay in production.

Estimates Trend

The Zacks Consensus Estimate for 2022 revenues is pegged at $6.36 billion, suggesting growth of 11.4% from the year-ago reported number, while the same for earnings stands at $4.82 per share, indicating a decline of 2.8%.

Stocks to Consider

Some better-ranked stocks in the broader medical space include AMN Healthcare Services, Inc. (AMN - Free Report) , Masimo Corporation (MASI - Free Report) and Veeva Systems, Inc.(VEEV - Free Report) .

AMN Healthcare surpassed earnings estimates in each of the trailing four quarters, the average surprise being 15.6%. The company currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare’s long-term earnings growth rate is estimated at 1.1%. The company’s earnings yield of 11.4% compares favorably with the industry’s (0.8%).

Masimo beat earnings estimates in each of the trailing four quarters, the average surprise being 4.4%. The company currently carries a Zacks Rank #2 (Buy).

Masimo’s estimated earnings growth rate for second-quarter 2022 is pegged at 22.3%. The company’s earnings yield of 3.8% compares favorably with the industry’s (8.5%).

Veeva Systems surpassed earnings estimates in each of the trailing four quarters, the average surprise being 9.6%. The company currently carries a Zacks Rank #2.

Veeva Systems’ long-term earnings growth rate is estimated at 18.1%. The company’s earnings yield of 2.4% compares favorably with the industry’s 0.2%.