The maker of the da Vinci surgical system reported better-than-expected results, driven by a rebound in procedures using its robots.
Intuitive Surgical Inc. (ISRG), the pioneering maker of robotic-assisted surgical systems, saw its stock price surge to all-time highs after the company reported fourth quarter results that significantly exceeded analysts’ expectations.
Q4 Financial Results Top Estimates
The Sunnyvale, California-based company posted adjusted earnings per share (EPS) of $1.23 on revenue of $1.66 billion in the fourth quarter ended December 31, 2023. This represents a beat on both the top and bottom lines, with EPS coming in 12 cents above estimates and revenue topping consensus forecasts by $60 million.
Key metrics from Intuitive Surgical’s Q4 2023 earnings:
| Metric | Actual | Estimate | % Surprise |
|---|---|---|---|
| Revenue | $1.66 billion | $1.6 billion | +3.75% |
| Adjusted EPS | $1.23 | $1.11 | +10.81% |
| Procedures Growth | 21% | 16.3% | +28.83% |
Shares of Intuitive Surgical jumped over 6% to a new all-time peak above $270 in early market trading the day after reporting results. The stock has massively outperformed the broader market over the past decade and is up over 80% in the last year alone.
Driving Intuitive’s Growth: Rebound in da Vinci Procedures
Powering Intuitive Surgical’s earnings beat was stronger than anticipated procedure growth using the company’s signature da Vinci surgical robots. The number of da Vinci procedures performed in Q4 increased 21% year-over-year to approximately 1.3 million.
This reacceleration in procedure volume reflects a continued recovery from pandemic-related impacts, which had previously caused many non-urgent surgeries using the da Vinci system to be delayed or cancelled. Elective procedures have rebounded swiftly over the past year as healthcare systems normalize.
Geographically, procedure growth was strongest in Europe, Asia, and domestic markets, up 30%, 28% and 19% respectively versus the prior year period. Notably, growth in China remained robust at 28% despite macroeconomic headwinds.
The strength in da Vinci procedures filters down directly to Intuitive Surgical’s financials. Over 70% of the company’s revenue is recurring, driven by instruments, accessories, and service contracts sold for use with the da Vinci system. As more surgical robots get installed and utilization increases, Intuitive generates higher high-margin revenue from these sources.
Upbeat Guidance Reflects Positive Tailwinds
Alongside better-than-expected Q4 results, Intuitive Surgical provided an optimistic outlook for 2024 that envisions continued strong growth. Management issued full-year revenue guidance with a midpoint of $7.1 billion, translating to 14% growth over 2023.
Several positive developments appear likely to sustain momentum over the next year:
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New System Launches – Intuitive plans to commercially launch its 4th generation da Vinci Xi and SP surgical systems in 2024. These next-gen robots add capabilities like enhanced visualization and improved ergonomics for surgeons. Management expects the upgrades will lead hospitals to purchase upgrades, supporting system sales and driving future procedure volumes.
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China Expansion – Having established a direct sales force in China in 2022, Intuitive is still early in penetrating this vast underserved market. Procedure growth above 25% is expected again in 2024, even if the region’s economy slows.
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Innovative Applications – Surgeons continue finding new applications to deploy Intuitive’s technology, now using the da Vinci across a wide range of specialties from urology to cardiac surgery. These new use cases will further expand the company’s addressable market.
Lingering Pandemic Uncertainty Clouds Outlook
Despite blowout Q4 results and an upbeat growth outlook from management, some analysts caution that Intuitive Surgical still faces risks from pandemic-induced economic weakness.
While elective surgeries have recovered to pre-pandemic levels in aggregate, continued disruption is occurring in some regions. A new wave of COVID-19 cases in China and parts of Europe, for example, could lead to renewed restrictions on non-urgent hospital procedures if healthcare systems come under pressure.
There are also concerns around how the global recessions and high inflation caused by the pandemic may affect patients’ willingness and ability to undergo expensive elective surgeries. These were likely secondary factors over the past year, but could pose headwinds if macro conditions worsen.
Continued innovation and penetration of underserved markets should drive multi-year growth tailwinds for Intuitive Surgical. But the sustainability of the recent earnings momentum likely hinges on the course of the pandemic recovery. Near-term volatility is likely, but for long-term investors the future remains bright for this pioneer in robotic-assisted surgery.
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