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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 the da Vinci Surgical System and a strong international presence. However, an increase in output costs is a headwind.

Shares of this Zacks Rank #3 (Hold) company have lost 43.7% compared with the industry’s decline of 31.1% this year. The S&P 500 Index has declined 19.5% in the same time frame.

ISRG — with a market capitalization of $73.66 billion — designs, manufactures and markets the da Vinci surgical system and related instruments and accessories. The da Vinci surgical system is an advanced robot-assisted surgical system. The company anticipates earnings to improve 9.5% over the next five years. It beat earnings estimates in two of the trailing four quarters, missed and matched once, the average surprise being 1.4%.

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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 had 7,135 da Vinci surgical systems by the end of the second quarter of 2022, with the installed base rising 12.6% year over year. For 2022, the company projects procedure growth of 12-16%. This estimate takes into account the uncertainty related to the pandemic.

With respect to digital capabilities, the company remains focused on improving the ecosystem. On second-quarter 2022 earnings call, the company stated that the My Intuitive app community continued to increase on a year-over-year basis. The app is available in the United States, Japan, Germany, France, the U.K., Ireland and Switzerland. The app 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)

Intuitive Surgical’s teams in Israel and the United States have developed Intuitive Hub on the back of its Orpheus technology. Intuitive Hub — 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 the da Vinci systems, enabling automated video capture with integrated procedure annotation for key events and building convenient video storage and review for event cases.

The FDA clearance earlier this year for integrating mobile cone-beam CT (CBCT) imaging technology with its minimally-invasive, robotic-assisted bronchoscopy system, Ion Endoluminal System, is likely to benefit the company. The technology would allow biopsy of small and difficult-to-access lesions in the lung as well as biopsy of peripheral lung and provide the necessary stability for precision in a biopsy.

In the second quarter of 2022, outside the United States, revenues totaled $511 million, up 11.5% on a year-over-year basis. This was driven by substantial growth in procedure volume. Outside the United States, Intuitive Surgical placed 129 systems in the second quarter compared with 115 in the prior-year quarter. Of these, 78 were in Europe, 18 in Japan and 15 in China.

What’s Weighing on the Company?

The COVID-19 pandemic adversely impacted 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 fulfill 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 $6.2 billion, suggesting growth of 8.6% from the year-ago reported number, while the same for earnings stands at $4.56 per share, indicating a decline of 8.1%.


Stocks to Consider

Some better-ranked stocks in the broader medical space are ShockWave Medical (SWAV - Free Report) , AMN Healthcare Services (AMN - Free Report) and McKesson (MCK - Free Report) . While ShockWave Medical and AMN Healthcare Services sport a Zacks Rank #1 (Strong Buy), McKesson carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ShockWave Medical’s earnings per share estimates rose from $2.02 to $2.57 for 2022 and from $2.95 to $3.42 for 2023 in the past 60 days. SWAV has gained 63.4% so far this year.

ShockWave Medical delivered an earnings surprise of 180.14%, on average, in the last four quarters.

Estimates for AMN Healthcare Services have improved from earnings of $10.41 to $11.26 for 2022 and $7.94 to $8.30 for 2023 in the past 60 days. AMN stock has declined 12.8% so far this year.

AMN Healthcare Services delivered an earnings surprise of 15.66%, on average, in the last four quarters.

McKesson’s earnings per share estimates increased from $23.26 to $24.25 for fiscal 2023 and $25.41 to $26.04 for fiscal 2024 in the past 60 days. MCK has gained 37.4% so far this year.

McKesson delivered an earnings surprise of 13.00%, on average, in the last four quarters.

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