Over the past decade, Intuitive Surgical (NASDAQ: ISRG) has proven to be a long-term winner in the healthcare sector. The stock is up more than 950% in that time frame, and more than 60% over the past year.
The maker of the da Vinci robotic-assisted surgery reported soaring revenue among its fourth-quarter results. Let's examine those recent results, along with the launch of Intuitive's newest da Vinci system, to help see whether the stock's momentum can continue.
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Revenue surges
The fourth quarter continued the trend of accelerating revenue growth for Intuitive Surgical. In the quarter, revenue soared 25% year over year to $2.41 billion while adjusted earnings per share (EPS) jumped 38% to $2.21. Those results blew past the analyst consensus for adjusted EPS of $1.79 on revenue of $2.25 billion, as compiled by FactSet Research Systems.
Year-over-year revenue growth has accelerated in each of the last three quarters:
- Q1: 11%
- Q2: 14%
- Q3: 17%
- Q4: 24%
Sales of instruments and accessories, which are single-use tools for surgeries, climbed by 23% year over year to $1.41 billion, while procedure volumes jumped 18%. Procedures for its Ion system, which is used to perform lung biopsies via robotic bronchoscopy, surged 70%.
Intuitive placed 493 da Vinci surgical systems in the quarter, increasing its installed base by 15% year over year to 9,902 systems. This included 174 of its new da Vinci 5 systems, which have been introduced on a limited basis, including its first da Vinci 5 system in South Korea.
Of the systems shipped, 222 were under operating-lease arrangements, including 140 systems with arrangements based on usage. The company started leasing its machines both to help hospitals with financing and to increase the market for its devices. And the more machines that are out there, the more instruments and accessories it can sell.
For the full year, Intuitive placed 1,430 multiport systems and 271 Ion systems. It also placed 96 units of its SP system, which allows surgery through a single port. Meanwhile, its customers increased their use of its platforms: Multiport utilization was up 3%, Ion up 13%, and SP up 12%.
Discussing its new da Vinci 5 system, Intuitive said it placed 362 of the devices in 2024, with more than 2,500 surgeons using the machine for 32,000 procedures. It will fully roll out the new units this year as it gets more regional approvals, and will introduce more hardware and software upgrades to the system.
Intuitive ended the quarter with $8.8 billion in cash and no debt. The company will put some of that money to work by acquiring its distributor that services Portugal, Spain, Malta, Italy, and San Marino. The deal is expected to close in 2026.
Looking ahead, Intuitive forecasts worldwide da Vinci procedures to rise approximately 13% to 16% in 2025. It expects its gross margins to be 67% to 68%, down from 69.1% in 2024. This is due to higher depreciation expense related to new manufacturing facilities, and da Vinci 5, Ion, and SP revenue having lower overall margins than the company average. The company also expects a strong U.S. dollar to be a headwind.
Image source: Getty Images.
Should investors buy the dip?
Intuitive Surgical had a strong year with revenue growth accelerating each quarter of 2024, topped off by an impressive fourth quarter. However, investors were disappointed with the company's guidance for gross margin. That said, the figure shouldn't come as a total surprise, as Intuitive had previously said that its da Vinci 5 system would initially come with lower gross margins and that it would improve over the next few years.
However, da Vinci 5 has a 30% higher average selling price (ASP) than its predecessor Xi system. On an apples-to-apples basis, the company said the cost is really closer to 15% more, given that da Vinci 5 has more options that are now standard. It also comes with a number of important new features, such as 3D display and force-sensing technology, meant to save surgeons time.
The higher-priced machine should be a nice driver of revenue growth as it's fully rolled out around the world. And by saving time, the da Vinci 5 should also help increase the number of procedures, driving accessories sales. Intuitive is also just launching its SP system in Europe and Japan this year.
There's plenty to like about Intuitive Surgical's business today. However, from a valuation standpoint, the stock now trades at a forward price-to-earnings (P/E) ratio of nearly 74, based on 2025 analyst estimates, and 94 on a trailing basis. That's high from a historical perspective:
ISRG PE Ratio (Forward) data by YCharts.
While Intuitive Surgical is a great company with a strong model, its current valuation is a bit frothy. I wouldn't chase the stock at current levels, and would prefer to see a pullback before considering it.
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends FactSet Research Systems and Intuitive Surgical. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
