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Intuitive Surgical Is Back in Growth Mode: Can It Keep the Momentum Going?

By Keith Speights and Brian Orelli, PhD - May 5, 2021 at 6:14AM

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Things are looking up for the robotic surgical systems leader.

Intuitive Surgical (ISRG -0.60%) reported its first-quarter results on April 20, 2021. The robotic surgical systems pioneer is clearly back in growth mode. In this Motley Fool Live video recorded on April 21, 2021, Motley Fool contributors Keith Speights and Brian Orelli discuss whether or not Intuitive can keep its momentum going.

Keith Speights: There was one other earnings from a big healthcare company announced this week, Brian, Intuitive Surgical, robotic surgical systems pioneer announced their Q1 results. So what do you think investors should make of Intuitive's Q1 update?

Brian Orelli: Intuitive Surgical is back in business. Their procedures were up 16 percent, that drove instrument and accessory revenue, which was up 14 percent. Demand is also driving new Da Vinci systems sales, so they shipped 26 percent more systems in this quarter than in the year-ago quarter, and then the installed base is now up 8 percent year-over-year.

Adjusted earnings per share were up 30 percent. Comparable for the rest of the year should be strong.

I think that people put off doing procedures, they weren't absolutely necessary during the pandemic and I think people are feeling more comfortable going back to hospitals now and so I think that Intuitive Surgical is benefiting from that.

Speights: Brian, I'm an Intuitive Surgical shareholder, so I'm definitely biased. I'm curious, what's your take on Intuitive's long-term prospects? What do you think?

Orelli: I think the problem is that they're working off a large base and so it becomes harder and harder to grow substantially, but I think high single-digit growth is certainly doable for the foreseeable future.

I think that the biggest thing is they're going to come up with new and more and more procedures that can be done on the machine, but I think doctors have really been interested in exploring those opportunities and so there is that opportunity for them, but I think it just becomes harder to get the growth because they have such a large base already of procedures that are just consistently done on a Da Vinci system.

Speights: Yeah, I know the company is especially eyeing other soft tissue type surgeries and you're right. One of the nice things about Intuitive is that their customers have a financial incentive to try to find new ways to use the Da Vinci system, because they get a better return on their investment for the machine itself.

Personally, I think the long-term prospects are good, even though the company has grown enormously over the last 20 years and I think you'll see robots being used and increasingly more types of surgical procedures over the next 10- 20 years, so I'm going to hold onto my shares.

I really like Intuitive's recurring revenue. It's pretty solid. Over 70 percent of their revenue is recurring, which is really good. Of course, that's driven by procedures and during the pandemic, those procedures fell off and Intuitive had some declines but like you said, Brian, they're back in business, back to growth mode and things are looking up.

Brian Orelli, PhD has no position in any of the stocks mentioned. Keith Speights owns shares of Intuitive Surgical. The Motley Fool owns shares of and recommends Intuitive Surgical. The Motley Fool recommends the following options: long January 2022 $580.0 calls on Intuitive Surgical and short January 2022 $600.0 calls on Intuitive Surgical. The Motley Fool has a disclosure policy.

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Intuitive Surgical, Inc. Stock Quote
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