Intuitive Surgical stock crumbled Friday after the robotic surgery giant issued lackluster gross margin guidance for 2025.
For the year, the company expects gross margins to be 67% to 68%. That was below the Street's forecast and a 69% gross margin in 2024, analysts said.
In addition, more revenue stemmed from the next-generation da Vinci 5, its SP platform and the lung cancer biopsy robot, Ion, than Intuitive Surgical's bread-and-butter da Vinci Xi system, William Blair analyst Brandon Vazquez said in a report. Further, the company faced headwinds from exchange rates.
"These are all transient headwinds, in our view, and we still forecast high-single-digit EPS (earnings per share) growth in 2025," he said.
But Intuitive Surgical stock slumped 8.1%, ending the regular session at 584.05. Shares enjoyed a five-day run after Intuitive Surgical preannounced most of its fourth-quarter metrics last week. Intuitive Surgical stock hit an intraday record high at 616 on Thursday and pulled back to close at 608.66.
Intuitive Surgical Stock: Earnings Beat
During the December quarter, the robotic surgery giant earned an adjusted $2.21 per share, easily beat forecasts for $1.79 a share, according to FactSet. The rest of Intuitive Surgical's report lined up with the preannouncement on Jan. 15 that sent Intuitive Surgical stock flying 7.7%.
The company generated $2.41 billion in sales, above calls for $2.25 billion. Sales grew 25% vs. the year-earlier period, benefiting richly from 493 new system placements. That beat expectations by 19% and contributed to two-thirds of the sales beat, Evercore ISI analyst Vijay Kumar said in a recent client note. Of those, 174 were new da Vinci 5 systems.
Notably, the number of procedures performed using Intuitive Surgical's robotic surgery systems rose 18%. Procedure volume is a key metric. When the number of procedures rise, so too do sales of single-use instruments and accessories.
To that end, sales of those tools ran up 23% to $1.41 billion in the fourth quarter, topping estimates for $1.37 billion.
Outlook Appears Conservative
Intuitive Surgical kept the outlook it issued on Jan. 15 for 13%-16% procedure growth in 2025, which lags 17% growth in 2024. But the company is known for being conservative in its guidance. Analysts currently project 17.1% procedure growth for the year.
"While the procedure guidance of 13-16% is a step down from recent years, historically ISRG has started conservatively and beaten them," Evercore's Kumar said. "As such, we are less concerned about ISRG's ability to maintain high teens procedure growth."
Intuitive Surgical says it was just 34% penetrated into the robotic surgery market before exiting 2024. The company sees room to more than double its total addressable market to 22 million procedures over time. As of now, Intuitive estimates its market opportunity at 8 million cases a year, William Blair's Vazquez said. That doesn't include an additional 700,000 procedures, annually, from Ion.
Vazquez has an outperform rating on Intuitive Surgical stock.
Da Vinci 5 Launch Underway
But Mizuho Securities Andrew Petrone stayed with his neutral rating.
"The moving parts still shake out to healthy double-digit EPS growth with the moving tea leaves on higher depreciation costs likely a strong indicator for accelerating placements over the next 12 months," he said in a note. "Although the DV5 cycle feels more underway, we believe shares fully reflect the opportunity under a traditional lens which keeps us sidelined until a better entry point."
Intuitive shares have a best-possible Composite Rating of 99. This puts the robotic surgery stock in the top 1% of all stocks in terms of fundamental and technical measures, according to IBD Digital.
Follow Allison Gatlin on X/Twitter at @IBD_AGatlin.
