Intuitive Surgical stock reversed Wednesday after investors digested the robotic surgery titan's conservative outlook on the back of President Donald Trump's tariffs.
The company said additional tariffs could have a "material" impact on the company's financials this year. Intuitive Surgical is also facing uncertainty around Medicaid funding cuts and policy changes. This could have an impact on how much hospitals are willing to spend on buying new systems — a critical component as Intuitive Surgical looks to fully launch its new da Vinci 5 this year.
Evercore ISI analyst Vijay Kumar says Intuitive Surgical took the "right approach" to its guidance. The company was conservative on tariffs, but raised its procedure volume growth outlook. For the year, Intuitive Surgical now expects the number of procedures using its da Vinci systems to increase 15% to 17%, up from its three-months-ago view for 13% to 16% growth.
"In the event US-China (headwinds) abate, we could see some upside to EPS," Kumar said in a client report, noting about 85 basis points of the gross margin headwind is tied to China. "On the other hand, dV5 placements declined QoQ … which makes the optics tough given launch year."
Still, on the stock market today, Intuitive Surgical stock jumped 1.9%, closing at 487.93. That reversed from a steep decline in after-hours trading Tuesday following the company's report. Shares are consolidating with a buy point at 616, but remain below their 50-day and 200-day lines, according to MarketSurge. Intuitive Surgical stock is an IBD Tech Leader.
'Good Execution' Boosts Intuitive Surgical Stock
The first quarter featured "good execution" with both sales and earnings beating forecasts, Kumar said. Intuitive Surgical earned an adjusted $1.81 per share and reported $2.25 billion in sales. Profit grew nearly 21%, while sales surged 19%.
Notably, Intuitive Surgical put up 17% procedure growth. This is an important metric for the robotic surgery company. When more procedures take place, hospitals need more one-time-use instruments and accessories. Instrument and accessories sales climbed 18% in the first quarter, to $1.37 billion.
Intuitive Surgical credited the growth in da Vinci procedure volume for the strong instrument and accessories sales. Ion, the company's lung biopsy robot, had 58% procedure growth.
But da Vinci 5 system placements slowed in the quarter. Intuitive Surgical installed 367 systems in the first quarter, with 147 of those being da Vinci 5 systems. But in the fourth quarter, the company installed 174 new da Vinci 5 systems.
Kumar has an in-line rating on Intuitive Surgical stock, and lowered his price target to 470 from 510.
Tariffs Could Have An Impact
Intuitive Surgical expects tariffs to be 170-basis-point headwind — at the midpoint — this year, William Blair analyst Brandon Vazquez said in a report.
The company "is not backing in any meaningful mitigation efforts until the tariff environment becomes more stable," he said. This could translate to a 4.5.-percentage-point headwind to earnings per share. That's in line with expectations, but also leaves room for upside if mitigation efforts are successful.
"We note that tariff headwinds will worsen each quarter tariffs remain in place (i.e., fourth-quarter headwinds will be worse than 170 basis points)," he said. "So there could be some lasting effects into 2026 (as for most companies), depending on how tariffs evolve."
But Vazquez kept his outperform rating on Intuitive Surgical stock. He expects sustained growth will support shares' momentum.
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