Intuitive Surgical beat Wall Street's quarterly sales and profit expectations, but ISRG stock tumbled Friday as procedure volume moderated sequentially and as new weight-loss drugs pressure bariatric surgery.
During the June quarter, the number of procedures using Intuitive Surgical's main product, the da Vinci robotic surgery system, grew 22% year over year. But that slowed from 26% growth in the first quarter. On an annual compounded basis, procedures have grown 17% from the second quarter of 2019.
The company called for 20%-22% procedure growth for the year. This brings the compounded annual growth rate to about 16.5% from 2019, Evercore ISI analyst Vijay Kumar said in a note to clients.
"While one can write this off as conservatism, Intuitive Surgical commentary on a slowdown in bariatric procedures due to GLP-1 weight-loss drugs gives reason for pause," he said. He kept his in-line rating on ISRG stock, but cut his price target to 315 from 325.
Also, notably, Intuitive Surgical's installed da Vinci systems lagged expectations at 8,042 globally, an increase of 12.5% year over year. Analysts polled by FactSet expected a bigger jump to 8,203. As a result, systems revenue of $393 million lagged expectations by $23 million.
On the stock market today, ISRG stock toppled 3.2% to 336.66. Shares have a strong Relative Strength Rating of 92 out of a best-possible 99, according to IBD Digital. This puts ISRG stock in the top 8% of all stocks when it comes to 12-month performance.
ISRG Stock: Sales, Earnings Beat
Overall, however, the second quarter largely represented an earnings beat for Intuitive Surgical. Sales advanced 15% to $1.76 billion, topping predictions for $1.74 billion. Adjusted profit ballooned nearly 25% to $1.42 per share. Analysts expected Intuitive Surgical to earn $1.33 per share.
Though slower than the first quarter, procedure growth was still helped by an easy comparison from the year-earlier period. During the same three months of 2022, increasing Covid cases cut down on procedure growth. That wasn't the case during the June quarter.
Strong procedure growth helps bolster sales of one-time instruments and accessories. During the June quarter, sales of instruments and accessories popped 20% to $1.08 billion, handily beating projections for $1.03 billion. Revenue from services — maintenance on the installed base of da Vinci systems — was in line with expectations at $287 million, and up 14%.
Though system revenue lagged forecasts, it climbed about 5%.
Bariatric Surgery Questions Remain
But the bariatric surgery question will continue to weigh on ISRG stock, Mizuho Securities analyst Anthony Petrone said in his note to clients.
Intuitive Surgical's da Vinci system can help surgeons perform bariatric surgery for weight loss. But a new class of weight-loss drugs — which includes Novo Nordisk's Wegovy and, likely soon, Eli Lilly's Mounjaro — has patients holding off on bariatric surgery.
"The company disclosed that its U.S. bariatric business slowed quarter over quarter with surgeons reporting that patients are delaying decisions around interventions as they consider new GLP-1 weight-loss drugs," Petrone said.
This could have a "not insignificant" impact on Intuitive Surgical, he added. There are about 200,000 bariatric surgeries in the U.S. each year valued at $400 million in annual instrument revenue.
Petrone kept his neutral rating and 370 price target on ISRG stock.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
