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Intuitive Surgical, Inc. ISRG is well-poised for growth on improving adoption of da Vinci Surgical System, strong international presence and robust recurring revenue base. However, increase in production costs raises concern.
Shares the company have gained 55.5% compared with the industry’s growth of 18.2% in a year’s time. Meanwhile, the S&P 500 Index has rallied 48.8% in the same time frame.
The company, with a market capitalization of $96.13 billion, designs, manufactures and markets the da Vinci surgical system and related instruments and accessories. Notably, the da Vinci surgical system is an advanced robot-assisted surgical system. It anticipates earnings to improve 9.4% over the next five years. Moreover, it has beat estimates in each of the trailing four quarters, the average surprise being 78.8%.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
What’s Deterring the Stock?
The COVID-19 pandemic adversely affected global supplies of semiconductors and other materials utilized in Intuitive Surgical’s products. Although the company has been making every effort to secure supply required to ensure fulfilment of consumer demand, global shortages might lead to higher production costs or delay in production.
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 bolsters overall performance.
On an overall basis, the recovery of procedures happened gradually during third-quarter 2020 and reached to approximately 90% of pre-COVID-19 levels by the end of that quarter. Notably, in the first quarter of 2021, da Vinci procedures grew 16%. Moreover, Intuitive Surgical placed 6,142 da Vinci surgical systems in the first quarter, with the installed base growing 8% year over year.
With respect to digital capabilities, the company’s My Intuitive, which is a mobile app enabling 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, has been helping amid this public health crisis.
The company’s Intuitive telepresence program supported 45% of all case observations in first-quarter 2021, up from less than 5% in the prior year — a substantial achievement that was accelerated by the pandemic. This. in turn, lowered the costs of the team at Intuitive Surgical, while boosting convenience for its customers. On a year-over-year basis, surgical stimulation usage increased around 46%, thereby validating the strength of digital tools.
The company is gradually gaining prominence in markets outside the United States. Outside the United States, revenues totaled $444.6 million, up 39.8% on a year-over-year basis. Outside the United States, the company placed 108 systems in the first quarter compared with 55 in the prior-year quarter. Of these, 59 were in Europe, eight in Japan and 23 in China.
Which Way Are Estimates Headed?
For 2021, the Zacks Consensus Estimate for revenues is pegged at $5.29 billion, indicating growth of 21.4% from the prior-year quarter. The same for earnings stands at $13.23 per share, suggesting an improvement of 30.2% from the year-ago reported figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space are HCA Healthcare, Inc. HCA, DaVita Inc. DVA and Amedisys, Inc. AMED, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
HCA Healthcare’s long-term earnings growth rate is expected at 12.3%.
DaVita’s long-term earnings growth rate is estimated at 14.4%.
Amedisys’ long-term earnings growth rate is estimated at 12%.
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Intuitive Surgical, Inc. (ISRG) : Free Stock Analysis Report
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