Intuitive Surgical, Inc. ISRG is well poised for growth on growing adoption of da Vinci Surgical System, strong international presence and solid recurring revenue base.
The company currently carries a Zacks Rank #2 (Buy).
Shares of Intuitive Surgical have gained 3.7% compared with the industry’s growth of 14.1% on a year-to-date basis. Meanwhile, the S&P 500 Index has rallied 17.4% in the same timeframe.
What’s Favoring the Stock?
Intuitive Surgical’s robot-based da Vinci surgical system enables minimally-invasive surgery, which reduces risks associated with open surgery. The company continues to gain from this system, which in turn boosts its overall performance.
In the second quarter of 2019, da Vinci procedure grew 17% globally from the second quarter of last year. This was driven by healthy growth in U.S. General Surgery. In the last reported quarter, Intuitive Surgical placed 273 da Vinci surgical systems, with the installed base growing 13% year over year to approximately 5,270. In fact, it now forecasts 2019 procedure growth to be 16-17% compared with the previously mentioned 15-17% rise.
Intuitive Surgical is gradually gaining prominence in markets outside the United States. In the second quarter of 2019, international revenues rose 19% year over year, owing to solid show by the Instruments & Accessories segment.
Notably, the segment grew on solid procedure growth and customer buying patterns. Intuitive Surgical placed 80 systems in the second quarter of 2019 compared with 82 units in the second quarter of 2018. Of these, 30 were in Europe, 24 in Japan and eight in China.
Intuitive Surgical’s business model ensures that it continues to generate revenues from initial capital sales of da Vinci Surgical Systems, and subsequent sales of instruments, accessories and services. In the second quarter, total recurring revenues were $780 million, up 21% year over year and representing a whopping 71% of total revenues.
Recurring revenues, as a proportion of total revenues, continue to grow at a much higher rate as compared with system sales. This ensures a regular stream of income, even in testing times. Moreover, Intuitive Surgical operates in a niche MedTech market, with no direct competition, which is a major positive.
Which Way Are Estimates Headed?
For 2019, the Zacks Consensus Estimate for revenues is pegged at $4.33 billion, indicating an improvement of 16.3% from the year-ago quarter. The same for earnings stands at $12.05 per share, suggesting growth of 9.7% from the year-ago reported figure.
Other Key Picks
Some other top-ranked stocks from the broader medical space are Baxter International Inc. BAX, Amedisys, Inc. AMED and CONMED Corporation CNMD, each currently carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Baxter has a long-term earnings growth rate of 12.8%.
Amedisys has a long-term earnings growth rate of 16.3%.
CONMED has a long-term earnings growth rate of 14.9%.
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