News

Shares of Intuitive Surgical, Inc. ISRG scaled a new 52-week high of $443.81 on Jun 25, before closing the session slightly lower at $442.31.

Over the past year, this Zacks Rank #3 (Hold) stock has gained 34% compared with the 3.7% rise of the industry and the S&P 500’s 25.3% growth.

Over the past five years, the company registered earnings growth of 6.5% compared with the industry’s 10.2% rise. The company’s long-term expected growth rate of 16.1% compares with the industry’s growth projection of 14.1%. Intuitive Surgical’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 6.8%.

Intuitive Surgical is witnessing an upward trend in its stock price, prompted by its strength in robotics. The optimism led by a solid first-quarter 2024 performance and a few regulatory clearances are expected to contribute further. However, concerns regarding moderating bariatric procedures and stiff competition persist.

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Let’s delve deeper.

Key Growth Drivers

Strength in Robotics: Investors are upbeat about Intuitive Surgical’s robot-based da Vinci surgical system that has been a key driver for the company’s performance since its launch in 1999. The company’s continued focus on upgrading the system has played a pivotal role in sustaining its growth. The minimally-invasive nature of the system has helped its wide adoption for certain surgical procedures.

Per the first quarter of 2024earnings callin April, the installed base of da Vinci systems grew approximately 14% year over year to 8,887 units. The utilization of clinical systems in the field increased 2% from the prior-year quarter. The metric was up 10% for da Vinci SP in the quarter. In the first quarter of 2024, procedures improved 14% in the U.S. market and 20% in the ex-U.S. market compared with the prior-year quarter.

Regulatory Clearances: Investors are optimistic about the recent few FDA approvals received by Intuitive Surgical. This month, it announced that the FDA had cleared a labeling revision for da Vinci X and Xi specific to radical prostatectomy.

In March, Intuitive Surgical announced the receipt of the FDA’s 510(k) clearance for da Vinci 5, the company’s next-generation multiport robotic system.

Strong Q1 Results: Intuitive Surgical’s solid first-quarter 2024 results buoy our optimism. The company’s top line improved year over year. Revenues were primarily driven by continued growth in the company’s da Vinci procedure volume, coupled with strong Ion procedure growth. Intuitive Surgical has also been increasing the pricing of procedures to fight inflationary pressure, which also aided sales growth.

Downsides

Moderating Bariatric Procedures: Intuitive Surgical has been witnessing a moderating growth for its bariatric procedure, used to treat patients with morbid obesity and its secondary effects, such as diabetes, for the past few quarters. The launch of new drugs in 2023, especially the GLP-1 class of drugs targeting the obesity and diabetes market, has adversely impacted da Vinci surgical system bariatric procedures as some patients reconsider the surgical option.

Stiff Competition: Intuitive Surgical has enjoyed 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.

Key Picks

Some better-ranked stocks in the broader medical space are DaVita Inc. DVA, LeMaitre Vascular, Inc. LMAT and Ecolab Inc. ECL.

DaVita, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 13.6%. DVA’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 29.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DaVita’s shares have gained 48.9% compared with the industry’s 14.2% rise in the past year.

LeMaitre Vascular, sporting a Zacks Rank of 1 at present, has an estimated long-term growth rate of 18.5%. LMAT’s earnings surpassed estimates in each of the trailing four quarters, with the average being 10.1%.

LeMaitre Vascular has gained 22.1% against the industry’s 1.9% decline in the past year.

Ecolab, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 14.3%. ECL’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 1.3%.

Ecolab’s shares have rallied 33.3% against the industry’s 12.9% decline in the past year.

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