Intuitive Surgical stock surged Friday after the robotic surgery behemoth blasted third-quarter earnings expectations out of the water.
During the September quarter, Intuitive Surgical earned an adjusted $1.84 per share. That walloped forecasts for $1.64 a share and grew 26% year over year. Sales climbed 17% to $2.04 billion, beating Wall Street's projection for $2.01 billion, according to FactSet.
The number of procedures performed using Intuitive Surgical's famous robot, da Vinci, popped 18%. Investors pay close attention to this number because when more procedures take place, customers buy more single-use instruments and accessories. Sales of those tools — the biggest contributor to Intuitive Surgical's top line — rocketed 18% to $1.26 billion, ahead of calls for $1.24 billion.
Now, the key question, says William Blair analyst Brandon Vazquez, "will be if Intuitive can deliver on expectations" going forward.
Intuitive Surgical stock closed 10% higher at 521.15. Shares have several weeks of tight trading under their belt that could be considered a flat base on the weekly chart. Shares broke out of that, easily topping an entry at 496.48.
Shares also closed above their 50-day line. Intuitive Surgical stock has risen 54.5% this year.
Intuitive Surgical Stock: da Vinci 5 Is Key
Notably, the company is now two quarters into the soft launch of its next-generation robot, called da Vinci 5. That system is likely to be a big catalyst in 2025, RBC Capital Markets analyst Shagun Singh said in a recent report to clients.
During the September quarter, Intuitive Surgical placed 379 new systems, up 21.5% compared to the same three-month period last year. Of those, 110 were da Vinci 5 robots. That accelerated from 70 da Vinci 5 systems in the second quarter, Evercore ISI analyst Vijay Kumar said in a client note.
"Looking further out, management reiterated gradual launch of da Vinci 5 and expects to be at full ramp mode by mid-2025," he said.
RBC's Singh sees Intuitive Surgical as having "quality with catalysts." The da Vinci 5 will kick off "a multiyear replacement cycle next year," she added.
"We believe sentiment for Intuitive Surgical continues to be positive heading into the third-quarter earnings season in anticipation of the da Vinci 5 demand buildup into year-end even though the system is in a limited launch currently," she said.
Procedure Slowdown Was Expected
The important number for Intuitive Surgical stock investors is procedure growth. Wall Street predicted 17.6% procedure growth in the third quarter, and Intuitive Surgical narrowly beat that at 18% for its da Vinci systems. That was relatively in line with 18.1% growth in the June quarter and just below 19% in the year-ago period.
Intuitive Surgical also reported 73% growth in the number of lung biopsies performed using its Ion robotic surgery system.
Singh, the RBC analyst, notes procedures tend to slow down in the third quarter. But capital purchases — customers buying new or replacement robotic surgery systems — build throughout the year.
"Our latest checks suggest that the appetite for capital is robust, which we believe positions Intuitive Surgical well into year-end," she said. "The expectations continue to be high, but investor inbounds suggest to us that this winner is one they want to own into year-end, as well as into 2025 as it enters the full launch."
She has an outperform rating on Intuitive Surgical stock, saying "dips and pauses are always the best time to add" to shares.
Operating Margins Drive Shares
For the year, Intuitive Surgical expects procedures to grow 16% to 17%, Evercore's Kumar said. But he is less bullish on the company's future and reiterated his in-line rating on Intuitive Surgical stock. Kumar raised his price target on shares to 490 from 475.
Kumar notes Intuitive's price/earnings multiple has expanded by more than 60% from pre-pandemic levels. But revenue and procedure growth have remained consistent from roughly 2017 to 2019 levels, though operating margins have continued to positively surprise.
"Generally growth stock price/earnings multiples are driven by revenue acceleration and not operating margins," he said. "It seems like the Street is pricing in a big revenue beat for fiscal year 2025."
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