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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 increasing adoption of the da Vinci Surgical System and strong global presence. Although the company is facing inflationary headwinds, its improved margins in the third quarter and lower-than-previously-expected operating expense growth are boosting sentiments.
Shares of this Zacks Rank #3 (Hold) company have dropped 10.8% compared with the industry’s decline of 14.1% in the past year. The S&P 500 Index has declined 13.2% in the same period.
ISRG — with a market capitalization of $91.49 billion — designs, manufactures and markets the da Vinci Surgical System, and its related instruments and accessories. The da Vinci Surgical System is an advanced robot-assisted surgical system.
Image Source: Zacks Investment Research
The company anticipates its earnings to improve 11.9% over the next five years. It beat earnings estimates in three of the trailing four quarters and missed the same once, the average earnings surprise being 3.41%.
What’s Favoring the Stock?
Intuitive Surgical’s robot-based da Vinci Surgical System enables minimally-invasive surgery that reduces the risks associated with open surgery. The company continues to gain from this system, which, in turn, bolsters the overall performance.
The company shipped 305 da Vinci Surgical Systems in the quarter, taking the total installed base to 7,364 by the end of third-quarter 2022. This reflected growth of 12.9% year over year. For 2022, the company projects procedure growth of 17-18%.
For digital capabilities, ISRG remains focused on improving the ecosystem. On the third-quarter 2022 earnings call, the company stated that the My Intuitive app community continued to increase on a year-over-year basis.
The My Intuitive app is currently available in several countries, including Japan, Germany, France, Ireland, Switzerland, the UK, and the United States, with more launches for the upcoming quarters. 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 Ion system is also experiencing a strong uptake as its installed base increased to approximately 254 systems in the third quarter, compared with approximately 98 systems in the year-ago period. The system expands the company’s service beyond surgery into diagnostic procedures.
Intuitive Surgical’s teams in Israel and the United States have developed the Intuitive Hub with 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.
The Intuitive Hub grew 21% from the third quarter of 2021. Moreover, software updates to the Hub installed base improved usability and enabled telepresence.
The FDA clearance earlier this year for integrating mobile cone-beam CT imaging technology with its minimally-invasive, robot-assisted bronchoscopy system, Ion Endoluminal System, is likely to benefit ISRG. The technology will allow the biopsy of small and difficult-to-access lesions in the lung and the peripheral areas and provide the necessary stability for precision in the process.
In the third quarter of 2022, outside the United States, revenues totaled $474.4 million, up 5.2% on a year-over-year basis. This was driven by substantial growth in the procedure volume. Outside the United States, Intuitive Surgical placed 130 systems in the third quarter compared with 109 in the prior-year period. Of these, 54 were in Europe, 32 in Japan and 17 in China.
Meanwhile, Intuitive Surgical’s gross and adjusted operating margins improved year over year in the third quarter. The expansion buoys optimism. The company now expects its pro-forma operating expense to grow 21-23%, lower than the previous guidance of 23-25%.
The company also expects its operating expenses to decline in 2023. A decrease in the expense guidance amid macro headwinds like inflation buoy optimism for the stock. However, intense competition in the global MedTech space is a concern.
What’s Weighing on ISRG?
The pandemic adversely impacted the global supply of semiconductors and other materials used in Intuitive Surgical’s products. Although the company has been making efforts to secure the supply for fulfilling consumer demand, global shortages might result in higher output costs or delay in production.
The Zacks Consensus Estimate for 2023 revenues is pegged at $6.97 billion, suggesting growth of 11.8% from the year-ago reported number, while the same for earnings stands at $5.34 per share, indicating a rise of 13.3%.
Laboratory Corp. of America, sporting a Zacks Rank #1 at present, has an earnings yield of 7% compared with the industry’s 4.3%. LH’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the same once, the average beat being 6.06%.
Laboratory Corp. of America has lost 6.3% compared with the industry’s 2.7% decrease in the past year.
Cardinal Health, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 11.7%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average beat being 3.04%.
Cardinal Health has gained 46.8% against the industry’s 2.7% decline in the past year.
McKesson, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 10.1%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same twice, the average beat being 4.79%.
McKesson has gained 52.7% against the industry’s 2.7% decline in the past year.
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Here's Why You Should Retain Intuitive Surgical (ISRG) Stock
Intuitive Surgical, Inc. (ISRG - Free Report) is well-poised for growth on the increasing adoption of the da Vinci Surgical System and strong global presence. Although the company is facing inflationary headwinds, its improved margins in the third quarter and lower-than-previously-expected operating expense growth are boosting sentiments.
Shares of this Zacks Rank #3 (Hold) company have dropped 10.8% compared with the industry’s decline of 14.1% in the past year. The S&P 500 Index has declined 13.2% in the same period.
ISRG — with a market capitalization of $91.49 billion — designs, manufactures and markets the da Vinci Surgical System, and its related instruments and accessories. The da Vinci Surgical System is an advanced robot-assisted surgical system.
Image Source: Zacks Investment Research
The company anticipates its earnings to improve 11.9% over the next five years. It beat earnings estimates in three of the trailing four quarters and missed the same once, the average earnings surprise being 3.41%.
What’s Favoring the Stock?
Intuitive Surgical’s robot-based da Vinci Surgical System enables minimally-invasive surgery that reduces the risks associated with open surgery. The company continues to gain from this system, which, in turn, bolsters the overall performance.
The company shipped 305 da Vinci Surgical Systems in the quarter, taking the total installed base to 7,364 by the end of third-quarter 2022. This reflected growth of 12.9% year over year. For 2022, the company projects procedure growth of 17-18%.
For digital capabilities, ISRG remains focused on improving the ecosystem. On the third-quarter 2022 earnings call, the company stated that the My Intuitive app community continued to increase on a year-over-year basis.
The My Intuitive app is currently available in several countries, including Japan, Germany, France, Ireland, Switzerland, the UK, and the United States, with more launches for the upcoming quarters. 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 Ion system is also experiencing a strong uptake as its installed base increased to approximately 254 systems in the third quarter, compared with approximately 98 systems in the year-ago period. The system expands the company’s service beyond surgery into diagnostic procedures.
Intuitive Surgical’s teams in Israel and the United States have developed the Intuitive Hub with 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.
The Intuitive Hub grew 21% from the third quarter of 2021. Moreover, software updates to the Hub installed base improved usability and enabled telepresence.
The FDA clearance earlier this year for integrating mobile cone-beam CT imaging technology with its minimally-invasive, robot-assisted bronchoscopy system, Ion Endoluminal System, is likely to benefit ISRG. The technology will allow the biopsy of small and difficult-to-access lesions in the lung and the peripheral areas and provide the necessary stability for precision in the process.
In the third quarter of 2022, outside the United States, revenues totaled $474.4 million, up 5.2% on a year-over-year basis. This was driven by substantial growth in the procedure volume. Outside the United States, Intuitive Surgical placed 130 systems in the third quarter compared with 109 in the prior-year period. Of these, 54 were in Europe, 32 in Japan and 17 in China.
Meanwhile, Intuitive Surgical’s gross and adjusted operating margins improved year over year in the third quarter. The expansion buoys optimism. The company now expects its pro-forma operating expense to grow 21-23%, lower than the previous guidance of 23-25%.
The company also expects its operating expenses to decline in 2023. A decrease in the expense guidance amid macro headwinds like inflation buoy optimism for the stock. However, intense competition in the global MedTech space is a concern.
What’s Weighing on ISRG?
The pandemic adversely impacted the global supply of semiconductors and other materials used in Intuitive Surgical’s products. Although the company has been making efforts to secure the supply for fulfilling consumer demand, global shortages might result in higher output costs or delay in production.
Intuitive Surgical, Inc. Price
Intuitive Surgical, Inc. price | Intuitive Surgical, Inc. Quote
Estimates
The Zacks Consensus Estimate for 2023 revenues is pegged at $6.97 billion, suggesting growth of 11.8% from the year-ago reported number, while the same for earnings stands at $5.34 per share, indicating a rise of 13.3%.
Stocks to Consider
Some better-ranked stocks from the broader medical space are Laboratory Corp. of America (LH - Free Report) , Cardinal Health, Inc. (CAH - Free Report) and McKesson (MCK - Free Report) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Laboratory Corp. of America, sporting a Zacks Rank #1 at present, has an earnings yield of 7% compared with the industry’s 4.3%. LH’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the same once, the average beat being 6.06%.
Laboratory Corp. of America has lost 6.3% compared with the industry’s 2.7% decrease in the past year.
Cardinal Health, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 11.7%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average beat being 3.04%.
Cardinal Health has gained 46.8% against the industry’s 2.7% decline in the past year.
McKesson, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 10.1%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same twice, the average beat being 4.79%.
McKesson has gained 52.7% against the industry’s 2.7% decline in the past year.