Intuitive Surgical, Inc. ISRG is well-poised for growth in the coming quarters, courtesy of its strength in robotics. The optimism led by solid first-quarter 2023 and its progress on the artificial intelligence (AI) front is expected to contribute further. The risk of procedure adoption and stiff competition persist.
Over the past year, this Zacks Rank #3 (Hold) stock has gained 41.6% compared with the 2.3% rise of the industry and the S&P 500’s 4.5% growth.
The renowned provider of minimally invasive care and the pioneer of robotic-assisted surgery has a market capitalization of $110.63 billion. It projects 13% growth for the next five years and expects to maintain its strong performance. Intuitive Surgical’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed the same in the other two, with the average earnings surprise being 1.9%.
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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.
Per the first-quarter 2023 earnings call in April, the installed base of da Vinci systems 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.
Progress on the AI Front: We are upbeat 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 Intuitive Surgical’s management, the rise of medical mechatronics, powerful computing, improved sensing, microfabrication and molecular imaging has enabled new approaches 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: Intuitive Surgical’s solid first-quarter 2023 results buoy our optimism. The company witnessed continued growth in da Vinci procedure volume.
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 the training of surgical teams. Market acceptance could be delayed by the time required to complete such training.
Stiff Competition: Intuitive Surgical used to enjoy a monopoly in the market for robots used in abdominal surgery since the launch of its flagship device, the da Vinci System, in 2000. However, after the regulatory approval of Transenterix's surgical robot for abdominal surgery in 2017, competition for Intuitive Surgical intensified.
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.
The Zacks Consensus Estimate for the company’s second-quarter 2023 revenues is pegged at $1.73 billion, suggesting a 13.8% improvement from the year-ago quarter’s reported number.
Some better-ranked stocks in the broader medical space are Hologic, Inc. HOLX, Merit Medical Systems, Inc. MMSI and Boston Scientific Corporation BSX.
Hologic, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 5.1% for fiscal 2024. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average being 27.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hologic has gained 4.7% compared with the industry’s 2.3% rise in the past year.
Merit Medical, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 20.2%.
Merit Medical has gained 43.3% compared with the industry’s 8.2% rise over the past year.
Boston Scientific, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.5%. BSX’s earnings surpassed estimates in two of the trailing four quarters and missed in the other two, the average surprise being 1.9%.
Boston Scientific has gained 29.3% against the industry’s 31.3% decline over the past year.
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