Over the previous decade, Intuitive Surgical (ISRG -0.41%) has confirmed to be a long-term winner within the healthcare sector. The inventory is up greater than 950% in that time-frame, and greater than 60% over the previous 12 months.
The maker of the da Vinci robotic-assisted surgical procedure reported hovering income amongst its fourth-quarter outcomes. Let’s study these latest outcomes, together with the launch of Intuitive’s latest da Vinci system, to assist see whether or not the inventory’s momentum can proceed.
Income surges
The fourth quarter continued the pattern of accelerating income development for Intuitive Surgical. Within the quarter, income soared 25% 12 months over 12 months to $2.41 billion whereas adjusted earnings per share (EPS) jumped 38% to $2.21. These outcomes blew previous the analyst consensus for adjusted EPS of $1.79 on income of $2.25 billion, as compiled by FactSet Analysis Programs.
Yr-over-year income development has accelerated in every of the final three quarters:
- Q1: 11%
- Q2: 14%
- Q3: 17%
- This autumn: 24%
Gross sales of devices and equipment, that are single-use instruments for surgical procedures, climbed by 23% 12 months over 12 months to $1.41 billion, whereas process volumes jumped 18%. Procedures for its Ion system, which is used to carry out lung biopsies through robotic bronchoscopy, surged 70%.
Intuitive positioned 493 da Vinci surgical methods within the quarter, rising its put in base by 15% 12 months over 12 months to 9,902 methods. This included 174 of its new da Vinci 5 methods, which have been launched on a restricted foundation, together with its first da Vinci 5 system in South Korea.
Of the methods shipped, 222 have been below operating-lease preparations, together with 140 methods with preparations primarily based on utilization. The corporate began leasing its machines each to assist hospitals with financing and to extend the marketplace for its units. And the extra machines which can be on the market, the extra devices and equipment it may well promote.
For the total 12 months, Intuitive positioned 1,430 multiport methods and 271 Ion methods. It additionally positioned 96 models of its SP system, which permits surgical procedure by way of a single port. In the meantime, its clients elevated 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 stated it positioned 362 of the units in 2024, with greater than 2,500 surgeons utilizing the machine for 32,000 procedures. It’s going to totally roll out the brand new models this 12 months because it will get extra regional approvals, and can introduce extra {hardware} and software program upgrades to the system.
Intuitive ended the quarter with $8.8 billion in money and no debt. The corporate will put a few of that cash to work by buying its distributor that providers Portugal, Spain, Malta, Italy, and San Marino. The deal is anticipated to shut in 2026.
Trying forward, Intuitive forecasts worldwide da Vinci procedures to rise roughly 13% to 16% in 2025. It expects its gross margins to be 67% to 68%, down from 69.1% in 2024. This is because of greater depreciation expense associated to new manufacturing services, and da Vinci 5, Ion, and SP income having decrease total margins than the corporate common. The corporate additionally expects a robust U.S. greenback to be a headwind.
Picture supply: Getty Pictures.
Ought to buyers purchase the dip?
Intuitive Surgical had a robust 12 months with income development accelerating every quarter of 2024, topped off by a powerful fourth quarter. Nevertheless, buyers have been dissatisfied with the corporate’s steering for gross margin. That stated, the determine should not come as a complete shock, as Intuitive had beforehand stated that its da Vinci 5 system would initially include decrease gross margins and that it will enhance over the following few years.
Nevertheless, da Vinci 5 has a 30% greater common promoting value (ASP) than its predecessor Xi system. On an apples-to-apples foundation, the corporate stated the fee is admittedly nearer to fifteen% extra, on condition that da Vinci 5 has extra choices that at the moment are commonplace. It additionally comes with a variety of essential new options, equivalent to 3D show and force-sensing know-how, meant to avoid wasting surgeons time.
The upper-priced machine ought to be a pleasant driver of income development because it’s totally rolled out world wide. And by saving time, the da Vinci 5 must also assist improve the variety of procedures, driving equipment gross sales. Intuitive can also be simply launching its SP system in Europe and Japan this 12 months.
There’s a lot to love about Intuitive Surgical’s enterprise right now. Nevertheless, from a valuation standpoint, the inventory now trades at a ahead price-to-earnings (P/E) ratio of almost 74, primarily based on 2025 analyst estimates, and 94 on a trailing foundation. That is excessive from a historic perspective:
ISRG PE Ratio (Ahead) information by YCharts.
Whereas Intuitive Surgical is a good firm with a robust mannequin, its present valuation is a bit frothy. I would not chase the inventory at present ranges, and would like to see a pullback earlier than contemplating it.
