Intuitive Surgical likely benefitted from a Covid-related backlog, an analyst said Wednesday, as ISRG stock broke out on a massive resurgence in March-quarter procedure volume.
During the three months ended March 31, the number of procedures completed using Intuitive Surgical's da Vinci system soared 26%. Procedure growth is an important metric for the robotic surgery behemoth. The more procedures performed, the stronger growth is from one-time instruments and accessories.
Even in the later stages of the Covid pandemic, procedure growth has been a sore point for ISRG stock. Quarterly growth last year ranged from 14% to 20%, according to the company's press releases. In 2018, 2019 and 2022, the number of da Vinci procedures each year grew about 18%, Evercore ISI analyst Vijay Kumar said in a note to clients.
"This 26% is a departure from historical high teens trends and raises the question whether we are at an inflection point," he said.
On today's stock market, ISRG stock jumped 10.9% to 298.57. That pushed shares into breakout territory above a buy point at 285.19 out of a cup base, according to MarketSmith.com.
ISRG Stock: A Major Backlog Boost?
Kumar said it's less likely Intuitive Surgical is at an inflection point and more likely the company saw a backlog in procedure demand during a lower Covid wave.
"Without any new procedure indications or international reimbursement updates, a procedure inflection thesis is tough to defend," he said. "Intuitive Surgical noted that a soft comparison from Covid and perhaps some backlog procedure growth were the main drivers of strength."
Supporting this thesis, Intuitive Surgical noted January and February procedure trends were strong, but March and early April normalized. And sales in China continued to negatively impact procedure volume in January, the company said in its news release.
"Our core business was lifted by positive surgical trends and continued interest in robotic-assisted surgery when compared with other surgical approaches," Intuitive Surgical Chief Executive Gary Guthart said in a written statement.
Strong Quarter For Robotic Surgery
Overall revenue jumped 14% to $1.7 billion, beating expectations for $1.59 billion, according to FactSet. On an adjusted basis, the robotic surgery company earned $1.23 per share, topping forecasts by 3 cents and rising almost 9%.
Revenue from instruments and accessories climbed 22% to $986 million, driven by the strong increase in da Vinci procedures. Systems revenue — the sales Intuitive Surgical receives for selling or leasing da Vinci systems — was roughly flat year over year at $427 million.
For the year, Intuitive Surgical now expects procedures to grow 18%-21%, Evercore's Kumar said. This is in line with historical trends for the second through fourth quarters and suggests adjusted earnings will grow by more than 20%, he said.
Kumar kept his in line rating on ISRG stock, but boosted his price target to 270 from 240.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
