Robotic surgery giant intuitive surgical (ISRG) It easily exceeded third-quarter expectations with action growth of 20% for the da Vinci system, sending ISRG shares higher on Wednesday.
Procedure growth is an important measure of intuitive surgery. The company sells or rents its robotic surgery system. But a major component of its revenue is the sale of one-time gadgets and accessories. Growth in actions leads to growth in those elements.
Since the third quarter of 2019 – at the start of the COVID pandemic – Intuitive Surgical has reported a 16% compound annual growth rate (CAGR) for actions. Q3 2022 easily beat 20% and ISRG stock is up.
Wall Street called for a more modest growth rate of 14.4%, Travis Stead, an analyst at Bank of America Securities said in a clients’ report. He said Intuitive Surgical “is seeing staff/supply chain stress easing and hospitals continue to prioritize da Vinci after budgets are rechecked.”
In morning trading in the stock market today, ISRG stock jumped 12.5% near 218. This helped the stock to surpass its 50-day moving average for the first time in almost a month.
ISRG Inventory: Order Placements Check Back
Overall, revenue rose 11% to $1.56 billion and beat expectations of $1.51 billion, according to FactSet. Intuitive Surgical also reported adjusted earnings of $1.19 per share, which is flat year over year. But that easily beats ISRG stock analysts’ expectations of $1.12 per share.
Intuitive Surgical placed only 305 Da Vinci Systems, down 9%. But that exceeded the number of views to 288, according to Bank of America’s Steed. Hold ISRG stock buy rating.
“We continue to see Intuitive Surgical as one of the top names in Midtech,” he said.
The company also recorded strong growth in sales of disposable gadgets and accessories. Revenue from these items increased 15% to $872 million. The increase was primarily due to 20% growth in transaction volume, which was partially offset by headwinds to exchange rates and buying patterns.
More action is expected
For the year, Intuitive Surgical now expects actions to grow 17%-18%, 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% versus previous forecasts of 23%-25%.
“She also made some relatively positive comments on the hospital environment (capital expenditures) during the conference call where she noted that she had not yet seen any signs of weakness in the rest of the world and that the United States was still competitive and not necessarily under pressure from a macroeconomic perspective,” Doyle said.
Doyle maintained a buy rating and a price target of 320 on ISRG stock.
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