ISRG shares rise after returning to pre-Covid growth levels

Robotic surgery giant Intuitive surgical ( ISRG ) beat expectations for the third quarter with 20% procedure growth for the da Vinci system, sending ISRG shares higher on Wednesday.


Procedural growth is an important benchmark for Intuitive Surgical. The company sells or leases its robotic surgery system. But a key component of revenue is the sale of disposable instruments and accessories. Growth in procedures leads to growth in these elements.

Since the third quarter of 2019 – at the onset of the Covid pandemic – Intuitive Surgical has reported a compound annual growth rate of 16% for procedures. The third quarter of 2022 easily surpassed this by 20%, and ISRG stock rose.

Wall Street was calling for a more modest growth rate of 14.4%, Bank of America Securities analyst Travis Steed said in a report to clients. Intuitive Surgical “sees staffing/supply chain pressures easing and hospitals still prioritizing da Vinci after re-evaluating budgets,” he said.

In morning trading on today’s stock market, ISRG stock jumped 12.5% ​​near 218. That helped the stock top its 50-day moving average for the first time in about a month.

ISRG Stock: System Locations Dip

Overall, revenue rose 11% to $1.56 billion, beating forecasts of $1.51 billion, according to FactSet. Intuitive Surgical also reported adjusted earnings of $1.19 per share, flat year over year. But it easily beat ISRG stock analysts’ forecast of $1.12 per share.

Intuitive Surgical placed just 305 da Vinci systems, down 9%. But it topped views for 288, according to Bank of America’s Steed. He maintained his buy rating on ISRG shares.

“We continue to view Intuitive Surgical as one of the best-positioned names in medical technology,” he said.

The company also reported strong growth in sales of disposable instruments and accessories. Revenue from these items increased 15% to $872 million. The increase was primarily due to 20% growth in procedure volume, partially offset by exchange rate headwinds and purchasing patterns.

More procedures are expected

For the year, Intuitive Surgical now expects 17%-18% procedure growth, up from its previous forecast of 14%-16.5%, UBS analyst Graham Doyle said in his note to clients. The company also expects operating expenses to grow by just 21-23% compared to previous expectations of 23-25%.

“It also made some relatively positive comments on the hospital (capital spending) environment during the conference call, flagging that it has yet to see any signs of weakness in the rest of the world and that the U.S. remains competitive rather than necessarily squeezed from a macro perspective,” said Doyle.

Doyle maintained his buy rating and 320 price target on ISRG stock.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.


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