On Friday, Evercore ISI adjusted its price target on shares of Intuitive Surgical (NASDAQ:ISRG) to $490, up from the previous $475, while maintaining an In Line rating. The firm's analysis highlighted that Intuitive Surgical reported approximately 17% year-over-year revenue growth, slightly surpassing Street estimates, driven by a 4% beat in Systems revenue and about a 1.8% beat in Consumable revenue.
The report detailed that Intuitive Surgical's system placements totaled around 379, which was 12% above Street estimates, bolstered by a significant outperformance in the U.S. market where placements were 37% higher than expected. This was partially offset by underperformance outside the U.S., particularly in Europe and China. The total placements of the da Vinci 5 (dV5) systems increased quarter-over-quarter from 70 to 110, aligning with cautious expectations set by the company within the quarter.
Procedure growth was also a highlight, with an overall increase of roughly 18%. This figure was slightly above Street estimates, although it included the benefit of an extra day in the period. When adjusted for this, procedure growth was around 17%. The growth was primarily driven by general surgery in both U.S. and international markets. Bariatric procedures saw a mid-single-digit decline, consistent with the previous quarter, while Ion procedures grew more than 70%.
The company's operating leverage was underscored, with selling, general, and administrative expenses coming in approximately 130 basis points below Evercore ISI's estimates, contributing to an operating margin beat. Earnings per share grew around 26%, with about 20% of this growth driven by revenue and operating margin expansion, and the remainder from higher interest income and a lower tax rate compared to Evercore ISI's expectations.
Management has updated its guidance, now anticipating procedure growth of 16%-17%, and has reduced its operating expense growth forecast to 10%-12%. Looking ahead, management reiterated a gradual launch of the dV5 system, expecting to be in full ramp mode by mid-2025, and acknowledged that depreciation expenses are anticipated to impact fiscal year 2025's operating margin.
The report concluded with a note on valuation, pointing out that Intuitive Surgical's price-to-earnings (P/E) multiple has expanded significantly since pre-pandemic levels, contrasting with a more modest expansion of the S&P 500. While revenue growth and procedure growth have been consistent with past years, operating margins have outperformed expectations.
Evercore ISI raised its fiscal year 2025 earnings per share estimate by approximately 3%, leading to the increased price target of $490, which implies a P/E multiple of around 70 times including stock-based compensation expenses.
In other recent news, Intuitive Surgical has been the focus of several financial services firms, with noteworthy adjustments to the company's stock target and ratings. Baird increased its price target for Intuitive Surgical to $565, maintaining an Outperform rating, while Wells Fargo (NYSE:WFC) reiterated its Overweight rating with a price target of $466. BTIG also maintained its Buy rating on the company with a price target of $494, highlighting the potential for growth within the general surgery domain.
RBC Capital Markets raised its price target for Intuitive Surgical to $515, citing strong acceptance of the company's latest DV5 robot by physicians and a stable capital environment. Redburn-Atlantic upgraded the company's stock from Neutral to Buy, with an increased price target of $510, reflecting a positive financial outlook.
These recent developments follow Intuitive Surgical's strong earnings and revenue results, which included a 17% increase in procedural volume worldwide and the placement of 70 da Vinci surgical systems. The company also witnessed a significant leadership change as President David J. Rosa joined the Board of Directors.
InvestingPro Insights
Intuitive Surgical's strong performance, as highlighted in the article, is reflected in the latest InvestingPro data. The company's revenue growth of 13.62% over the last twelve months aligns with the robust procedure growth mentioned. Additionally, the operating income margin of 25.79% underscores the company's operational efficiency, supporting the article's emphasis on operating leverage.
InvestingPro Tips indicate that Intuitive Surgical is "Trading at a high earnings multiple" and "Trading at a high P/E ratio relative to near-term earnings growth." This corroborates the article's discussion on valuation, particularly the expanded P/E multiple. The current P/E ratio of 79.71 further illustrates this point.
Another relevant InvestingPro Tip notes that the stock is "Trading near 52-week high," with the price at 95.42% of its 52-week high. This aligns with the positive outlook and increased price target mentioned in the article.
For investors seeking a deeper understanding of Intuitive Surgical's financial health and market position, InvestingPro offers 12 additional tips, providing a comprehensive analysis to inform investment decisions.
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