Shares of Intuitive Surgical Inc. saw a surge of 9.5% on Wednesday, making it the top gainer in the S&P 500. The maker of robotic surgical equipment reported an optimistic update on its fourth-quarter sales guidance, driven by a recovery in China.
Stock Performance: The stock, with the ticker symbol ISRG, marked its biggest one-day gain since April 19, 2023, when it rose by 10.9%. In the past five days, it has shown gains in four instances.
Robust Fourth-Quarter Revenue: Intuitive Surgical announced on Tuesday evening that it expects fourth-quarter revenue to reach approximately $1.93 billion, surpassing FactSet’s forecast of $1.87 billion. This projection represents a year-over-year increase of 17%.
Increased Usage of Robotic System: The company witnessed a notable increase of 21% in procedures involving their robotic surgical system, called da Vinci, compared to the previous year. This growth can be attributed to the recovery from the impact of COVID-19 in China, which had hampered procedures in the past.
Market-Specific Trends: According to company executives, China experienced a rebound in procedures as COVID-19 infections and hospitalizations decreased. On the other hand, in the United States, general surgery procedures contributed to higher usage of da Vinci throughout 2023, while cancer procedures led to increased usage outside the country.
Positive Outlook for 2024: Intuitive Surgical anticipates a further rise in da Vinci procedures worldwide for the year 2024, with a projected increase of 13% to 16%. This guidance was perceived as better than expected by Truist analysts, considering the company’s tendency to be conservative with early-year predictions.
Analysts at Truist wrote in a note to clients: “We (and we believe some investors) were braced for a more conservative initial ’24 procedure range in the 11-15% range, so a higher initial ‘starting point’ is likely to be well-received.”
Truist Expects Update on New System Launch at Competitor Conference
Truist, a prominent investment firm, believes that investor attention will be focused on an upcoming competitor conference, where they anticipate potential insight into a new system launch. However, they do not anticipate any specific updates on this matter during the conference.
The analysts at Truist remain optimistic and assert that a new system announcement is likely to be made by the end of 2024. In preparation for this potential catalyst, they prefer to be early rather than late.
JPMorgan, another reputable firm, shares the same positive outlook and rates the stock as a strong buy. They suggest that the guidance provided for 2024 presents a reasonable benchmark for outperforming the market for the remainder of the year.
The JPMorgan analysts hope to gain more clarity on the assumptions underlying the provided guidance during the conference and their subsequent call with management. They believe that this range may prove to be conservative, as their research indicates consistently high levels of underlying volumes, which are expected to persist throughout the year.
Additionally, the JPMorgan team is particularly interested in obtaining more information about the international outlook, with a specific focus on China. They believe that understanding the geographical procedures and changes in competitive dynamics will be crucial for a comprehensive evaluation.
Oppenheimer analysts echo these sentiments and express their anticipation of more detailed insights when ISRG reports its full 4th quarter 2023 results on Tuesday, January 23rd. They emphasize the importance of analyzing procedure outlook by geography and staying updated on changes in competitive dynamics.
Furthermore, other analysts surveyed by FactSet share the bullish sentiment for the stock, with 17 out of 25 holding a “buy” view. The remaining eight analysts have maintained their “hold” stance.
Over the past 12 months, the stock has experienced significant growth, with a notable increase of 34%. In comparison, the S&P 500 (SPX) has only gained 22% during the same period.
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