Intuitive Surgical (NASDAQ: ISRG) will report its Q3 2023 results on Thursday, October 19. We expect the company’s revenues to come in at $1.8 billion, aligning with the consensus estimate. This would mark year-over-year growth of about 16%. Earnings are likely to come in at about $1.42 on a per-share and adjusted basis, in line with the consensus estimate of $1.41. See our interactive dashboard analysis on Intuitive Surgical Earnings Preview for more details on how the company’s revenues and earnings will likely trend for the quarter. So, what are some of the trends that are likely to drive Intuitive Surgical’s results?
ISRG stock has seen little change, moving slightly from levels of $275 in early January 2021 to around $275 now, vs. an increase of about 15% for the S&P 500 over this roughly 3-year period. Overall, the performance of ISRG stock with respect to the index has been lackluster. Returns for the stock were 32% in 2021, -26% in 2022, and 4% in 2023 (YTD). In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 14% in 2023 (YTD) – indicating that ISRG underperformed the S&P in 2022 and 2023.
In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the healthcare sector, including LLY, UNH, and JNJ, and even for the mega-cap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index, less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
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Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could ISRG face a similar situation as it did in 2022 and 2023 and underperform the S&P over the next 12 months – or will it see a strong jump? Going by our Intuitive Surgical Valuation of $348 per share, it seems to have ample room for growth.
The company will likely continue to benefit from a rise in total procedure volume. The company continues to expand its installed base, which results in the growth of recurring revenues, such as consumables. Intuitive Surgical’s revenue of $1.8 billion in Q2’23 reflected a 15% y-o-y rise, with instruments and accessories seeing 20% growth, services up 14%, and the systems segment seeing 5% growth. Overall procedure volume was up 22%, and the company’s installed base grew 13% to 8,042 systems. Intuitive Surgical saw its operating margin rise by a modest 30 bps to 26.4% in Q2’23. However, with elevated inflation, the costs may remain high for the company in the near term. Higher revenues and margin expansion resulted in Intuitive Surgical’s earnings rising 25% y-o-y to $1.42 on a per-share and adjusted basis.
While ISRG stock looks like it has ample room for growth, 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.
|S&P 500 Return||2%||14%||95%|
|Trefis Reinforced Value Portfolio||2%||26%||545%|
 Month-to-date and year-to-date as of 10/18/2023
 Cumulative total returns since the end of 2016