Will Intuitive Surgical Stock Rise Post Q4?

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Trefis
ISRG: Intuitive Surgical logo
ISRG
Intuitive Surgical

Intuitive Surgical (NASDAQ: ISRG) is scheduled to report its Q4 2022 results on Tuesday, January 24. We expect Intuitive Surgical to report revenue and earnings above the street estimates, driven by a rise in total procedures volume. However, inflationary headwinds may weigh on the company’s net margins. Although we believe the company will navigate well during the quarter, we find the stock to be fully valued, as discussed below. Our interactive dashboard analysis on Intuitive Surgical Earnings Preview has additional details.

(1) Revenues expected to align with the consensus estimates

  • Trefis estimates Intuitive Surgical’s Q4 2022 revenues to be around $1.7 billion, aligning with the $1.7 billion consensus estimate. 
  • The overall procedure volume continued to see double-digit growth, rising 18% in Q4, per the company’s preliminary results released last week.
  • Looking at Q3 2022, the company saw its sales rise 11% (y-o-y) to $1.6 billion. This can be attributed to a higher demand for consumables. The overall procedure volume grew 20% during the quarter.
  • Our dashboard on Intuitive Surgical Revenues has more details on the company’s segments.
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(2) EPS likely to be slightly above the consensus estimates

  • Intuitive Surgical’s Q4 2022 adjusted earnings per share (EPS) is expected to be $1.33 per Trefis analysis, slightly above the $1.25 consensus estimate.
  • The company’s adjusted net income of $429 million in Q3 2022 reflected a 1.4% fall from its $435 million figure in the prior-year quarter, as the 11% sales growth was more than offset by nearly 350 bps drop in net margins. This can primarily be attributed to higher logistics costs and increased component pricing.
  • With the rising inflation, the costs may remain high for the company in the near term.
  • For the full-year 2023, we expect the adjusted EPS to be higher at $5.52 compared to $4.96 in 2021, and an estimated $4.79 in 2022.

(3) ISRG stock is undervalued

  • We estimate Intuitive Surgical’s Valuation to be around $243 per share, which is 6% below the current market price of $259.
  • At its current levels, ISRG stock is trading at 47x forward adjusted earnings, aligning with its last three-year average, implying the stock is fully valued.
  • Investors have assigned a high trading multiple for ISRG stock, given the substantial revenue and earnings growth over the past years.
  • Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year
While ISRG stock looks appropriately priced, it is helpful to see how Intuitive Surgical’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Abbott vs. Amerco.

With inflation rising and the Fed raising interest rates, among other factors, ISRG stock has plunged 13% in the last twelve months. Can it drop more? See how low Intuitive Surgical stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Jan 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 ISRG Return -2% -2% 269%
 S&P 500 Return 4% 4% 79%
 Trefis Multi-Strategy Portfolio 8% 8% 241%

[1] Month-to-date and year-to-date as of 1/17/2023
[2] Cumulative total returns since the end of 2016

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