Back to top

Image: Bigstock

3 Reasons to Add Intuitive Surgical (ISRG) to Your Portfolio

Read MoreHide Full Article

Intuitive Surgical, Inc. (ISRG - Free Report) is well poised for growth in the coming quarters, courtesy of its strength in robotics. The optimism, led by solid first-quarter 2023 results and its progress on the artificial intelligence (AI) front, is expected to contribute further. Risks pertaining to procedure adoption and stiff competition persist.

Shares of this Zacks Rank #2 (Buy) company have risen 31% year to date compared with the industry ’s  8.4% growth. The S&P 500 Index has gained 16.5% during the same time frame.

Intuitive Surgical,  the pioneer of robotic-assisted surgery and the renowned provider of minimally invasive care, has a market capitalization of $118.82 billion. It projects 13% growth over the next five years and expects to maintain its strong performance going forward.

The company’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed the same in the other two, delivering an average surprise of 1.9%.

Zacks Investment Research
Image Source: Zacks Investment Research

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.

On ISRG’s first-quarter 2023 earnings call in April, the installed base of the da Vinci system grew approximately 12% year over year. The utilization of clinical systems in the field, measured by procedures per system, was up 13% 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 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: The company’s solid first-quarter 2023 results also buoy our optimism. The company witnessed continued growth in da Vinci procedure volume during the quarter.

Downsides

Risk of Procedure Adoption: Intuitive Surgical faces the risk of adoption of its procedures. This is because adoption growth takes time, as each procedure needs to gain credibility. Furthermore, the wide use of the company’s products requires training of surgical teams. Market acceptance could be delayed by the time required to complete such trainings.

Stiff Competition: Since the launch of its flagship device, the da Vinci System, in 2000, Intuitive Surgical used to enjoy a monopoly in the market for robots used in abdominal surgery. However, the competition for ISRG intensified following the regulatory approval of Transenterix's surgical robot for abdominal surgery in 2017.

Estimate Trend

Intuitive Surgical is witnessing a positive estimate revision trend for 2023. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 3.8% north to $5.47 per share.

The consensus mark for the company’s second-quarter 2023 revenues is pegged at $1.73 billion, indicating a 13.8% improvement from the year-ago quarter’s reported number.

Other Stocks to Consider

A few other top-ranked stocks from the broader medical space are Alcon (ALC - Free Report) , DexCom (DXCM - Free Report) and Hologic (HOLX - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Alcon has an estimated long-term growth rate of 14.9%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 8.85%.

ALC’s shares have rallied 22.8% year to date compared with the industry’s 8.4% growth.

DexCom has an estimated long-term growth rate of 40.4%. Its earnings surpassed estimates in three of the trailing four quarters and met the same once, delivering an average surprise of 15.19%.

DXCM’s shares have risen 18% year to date compared with the industry’s 8.4% growth.

Hologic has an estimated earnings growth rate of 4.1% for fiscal 2024. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 27.32%.

HOLX’s shares have risen 5.6% year to date compared with the industry’s8.4% growth.

Published in