Intuitive Surgical, Inc. ISRG is set to report fourth-quarter 2024 earnings on Jan. 23. The Zacks Consensus Estimate for sales and earnings is pegged at $2.41 billion and $1.77 per share, respectively. Earnings per share estimates for ISRG increased 1 cent to $6.67 and $7.66 for 2024 and 2025, respectively, over the past 30 days. Per the preliminary fourth-quarter results announced earlier this month, the company’s top-line is anticipated to increase 25%.
Intuitive Surgical’s close peers, namely Thermo Fisher Scientific TMO andMedtronic MDT, are slated to announce their quarterly numbers in the upcoming few weeks.
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Estimate Movement
In the last reported quarter, ISRG delivered an earnings surprise of 11.52%. Its earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 10.96%.
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Earnings Whisper
Our proven model predicts an earnings beat for Intuitive Surgical this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
ISRG has an Earnings ESP of 7.29% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors to Note
ISRG reported preliminary sales of $2.41 billion for the fourth quarter of 2024, indicating growth of 25% year over year, driven by solid procedure performance and strong capital placements.
The Instruments & Accessories segment is likely to report robust fourth-quarter results on the back of several favorable factors, especially strong da Vinci procedure growth. Per the preliminary report, the company’s instruments and accessories revenues are likely to be approximately $1.41 billion, up 23% year over year. The preliminary da Vinci procedures increased 18% year over year. Procedure volume was driven by growth in U.S. general surgery and cancer procedures in ex-U.S. markets.
Meanwhile, the launch of da Vinci 5 systems is bringing in additional system placement. ISRG received approval for da Vinci 5 in Korea in October last year. During the third quarter, the company received FDA clearance for 8-millimeter SureForm 30 stapler. These developments are likely to have aided top-line growth in the fourth quarter.
General surgery procedures have aided procedure growth in the U.S. market, while cancer procedures benefited ex-U.S. markets during the third quarter. We expect this trend to have continued in the fourth quarter. Procedures with Ion platform are also likely to have exhibited robust growth. However, declining demand for bariatric procedures, especially in the United States, might have partially offset the growth.
Moreover, China's recovery, fueled by strong procedure growth following COVID-related setbacks in the past year, is likely to have boosted sales in the soon-to-be-reported quarter. Apart from China, rising adoption in Japan and India might have aided sales growth.
The Systems segment’s results are expected to reflect strong adoption of the newly launched da Vinci 5. Per the preliminary fourth-quarter results, ISRG placed 174 da Vinci 5 systems in the United States, reflecting nearly 60% growth sequentially. The company’s strong system placements in the United States during the fourth quarter looks promising. Moreover, robust system placements in the Asia-Pacific region are likely to have aided placement growth further. However, system placements in China are likely to have been under pressure amid delayed tenders and emerging domestic robotic systems.
Apart from improved system placements globally, segmental revenues are likely to have been aided by a higher average selling price per unit. Ion system placements should have remained strong during the fourth quarter.
The Services segment’s quarterly results are expected to reflect strong adoption of ISRG’s digital products and services, including Intuitive App and Intuitive Hub.
Meanwhile, ISRG’s margins are likely to have improved due to cost reductions and fixed overhead leverage. Lower inventory reserves and reduced freight rates should have aided margins. However, depreciation expense is likely to have increased, hurting margins. Proforma operating expenses for full-year 2024 are likely to have increased 10-12%.
Price Performance & Valuation
Intuitive Surgical’s shares have appreciated 31.3% in the past six months, significantly above the industry’s 2.2% growth. The company’s shares have also outperformed the S&P 500 Index’s rise of 8.2% and the Zacks Medical sector’s decline of 10.8%.
ISRG has also outperformed Thermo Fisher Scientific’s 4.8% return and Medtronics’ 11.5% gain in the past six months.
Six-Month Price Performance
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Now, let us take a look at the value Intuitive Surgical offers to its investors at current levels.
Currently, ISRG is trading at a premium compared to its industry, with a forward 12-month P/E of 93.03X compared with the industry’s 33.14X. However, the current valuation came down from a high of 96.05X but is higher than the five-year median of 70.86X. ISRG has traded at a premium to the industry valuation in the past five years, reflecting the company's higher growth prospects. However, the valuation is hovering at its five-year high, which may lead to a correction in share prices going forward. The current Value score of D also reflects a high valuation.
ISRG's P/E F12M Graph
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Investment Thesis
Although the valuation remains high, Intuitive Surgical is likely to continue its strong performance in the rest of 2025, driven by continued growth in the company’s da Vinci procedure volume and strong Ion procedure growth. Improving prices of procedures should aid in sales growth going forward. Improving procedure volume, along with better system placements and services across all markets, should drive top-line growth this year.
The launch of da Vinci SP in Europe and da Vinci 5 in the U.S. market should continue to drive system placements higher. However, weakness in bariatric procedures and challenges in China are likely to offset growth in the upcoming quarters.
Conclusion
ISRG’s favorable Earnings ESP indicates a significant move following the earnings result. However, we believe that investors should not rush into buying the stock now as the stock gained after the preliminary results. Also, ISRG has a favorable Zacks Rank, but the Style Score of D does not reflect a major strength in the stock. The company’s high valuation may have factored in the strong fundamentals, including growth in procedures and installed base. Investors should add the stock to their watchlist and track it for cheaper valuation.
While current shareholders should hold their position, new investors should wait for the stock to retract some of its recent gains, providing a better entry point. However, valuation may continue to remain expensive as ISRG plans to expand efforts to place systems beyond the United States, increase utilization in existing U.S. accounts and expand into additional indications in the next two years.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
