Intuitive Surgical Stock To See Higher Levels Post Q1?

Intuitive Surgical (NASDAQ: ISRG) is scheduled to report its Q1 2023 results on Tuesday, April 18. We expect Intuitive Surgical to report revenue and earnings slightly above the street estimates, driven by a rise in total procedures volume. Although we believe the company will navigate well during the quarter, the stock has little room for growth, as discussed below. Our interactive dashboard analysis on Intuitive Surgical Earnings Preview has additional details.

(1) A rise in procedure volume to drive revenue growth 

• Trefis estimates Intuitive Surgical’s Q1 2023 revenues to be around $1.61 billion, marginally above the $1.59 billion consensus estimate. 
• The overall procedure volume will likely drive the sales growth for Intuitive Surgical. This has been the trend over the recent quarters, and we expect it to continue in the near term.
• Looking at Q3 2022, the company saw its sales rise 7% (y-o-y) to $1.66 billion. This can be attributed to a higher demand for consumables. The overall procedure volume grew 18% during the quarter. All three segments – Instruments & Accessories, System, and Services saw sales rise during the quarter. However, Intuitive Surgical placed 369 da Vinci Surgical systems in the previous quarter, vs. 385 in Q4 2021.
• Our dashboard on Intuitive Surgical Revenues has more details on the company’s segments.

(2) EPS likely to be slightly above the consensus estimates

• Intuitive Surgical’s Q1 2023 adjusted earnings per share (EPS) is expected to be $1.22 per Trefis analysis, slightly above the $1.20 consensus estimate.
• The company’s adjusted net income of $439 million in Q4 2022 reflected a 7% fall from its $473 million figure in the prior-year quarter, as the 7% sales growth was more than offset by a nearly 385 bps drop in adjusted net margins. This can primarily be attributed to higher fixed costs.
• With elevated inflation, the costs may remain high for the company in the near term. Our Intuitive Surgical Operating Income Comparison dashboard has more details.
• For the full-year 2023, we expect the adjusted EPS to be higher at $5.35 compared to $4.68 in 2022.

(3) ISRG stock has little room for growth

• We estimate Intuitive Surgical’s Valuation to be around $278 per share, which is 5% above the current market price of $263.
• This represents a 52x P/E multiple based on our forward adjusted earnings expectation of $5.35.
• ISRG stock enjoys a higher valuation multiple, 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