Intuitive Surgical is Friday's IBD Stock Of The Day after the robotic surgery behemoth crushed Wall Street's second-quarter expectations and raised its procedure guidance for the year.
The Sunnyvale, Calif.-based company faced numerous obstacles in its June quarter. China's anti-corruption campaign in health care has disrupted the market. The company has also grappled with the impact of physician strikes in South Korea and the volume of bariatric surgeries has declined due to obesity drugs and the supply chain remains tight.
Yet, Intuitive Surgical came out of the June quarter with adjusted profit of $1.78 per share and $2.01 billion in sales. Both metrics topped forecasts and grew a respective 25% and 14%.
This emphasizes "the underlying momentum of the business and (points) to upside potential as these headwinds stabilize/improve through 2024 and especially into 2025," William Blair analyst Brandon Vazquez said in a report.
Intuitive Surgical Stock
On today's stock market, Intuitive Surgical stock jumped 9.3% to close at 455.01.
Shares bounded off their 10-week line on the earnings report, hitting a new record 456.81 soon after the open. The stock is in a buy zone from support at the line.
Intraday, ISRG stock cleared a three-weeks-tight entry of 449.
Intuitive Surgical's Growing Procedures
Importantly, the number of procedures using Intuitive Surgical's bread-and-butter system, da Vinci, climbed 17% year over year during the June quarter. That topped projections for 15%, according to FactSet.
In the U.S., procedures climbed 14% despite a mid singe-digit decline for bariatric surgery, Evercore ISI analyst Vijay Kumar said in a client note. Bariatrics remain under pressure amid the popularity of weight-loss drugs from Novo Nordisk and Eli Lilly. In the first quarter, bariatric volumes were flat, following 10% growth in the fourth quarter.
But general surgery using da Vinci and lung biopsies with the Ion system helped make up for the dip in the bariatric space, Kumar said. Ion procedures grew 80% year over year. William Blair's Vazquez noted Intuitive Surgical grew its Ion installed base by 56% during the quarter, expanding in key areas like China.
"Supply is improving, but work remains on improving efficiencies/reliability," he said.
Vazquez kept his outperform rating on Intuitive Surgical stock. He notes the company raised its view for the year and now expects procedure volume to grow 15.5% to 17%, up from the previous guidance for 14% to 17% growth.
"We continue to think this is achievable and likely conservative given momentum in key growth segments globally," Vazquez said.
New Launch Is Key, But Likely Slow
Notably, Intuitive Surgical is in the midst of launching its new da Vinci 5 system. In the June quarter, it placed 70 of those next-generation robots. That's up from eight in the first quarter, Mizuho Securities analyst Anthony Petrone said in a report.
But Petrone kept his neutral rating on Intuitive Surgical stock.
"Early DV5 feedback from surgeons continues to point toward efficiency gains, force feedback and case insights solutions as key adoption drivers," he said. "Despite the strong showing, DV5 supply is still constrained, reaffirming that a full-scale launch will likely not come until next year."
Evercore's Kumar offered a similar view. The company has said it expects da Vinci 5 placements to be constrained in the first half of 2025. And William Blair's Vazquez noted the company won't launch the next-generation robot in Europe until 2026.
Kumar kept his in-line rating on Intuitive Surgical stock. He noted the stock reaction to the earnings report suggests investors had elevated expectations heading into the late Thursday release. But it's unclear whether the company can keep up with those lofty projections.
"From a macro standpoint, a potential softness in tech is also an overhang given Intuitive Surgical has been correlated with tech," he said. "In a game of expectations, we are unsure how Intuitive Surgical could react."
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