As one of the biggest healthcare companies on the market and the world's largest robotic surgery company by far, Intuitive Surgical (ISRG -0.41%) has a lot of momentum. With its razor-and-blade business model, it has profitably sold the da Vinci robotic surgical suite and its associated surgical tools at a larger and larger scale since the early 2000s.
On Jan. 12, Intuitive released a sneak peek of its performance in 2021, with the full results due on Jan. 20. Let's analyze the most important tidbits from the preliminary report so that you'll know whether the stock might be worth an investment this year.
Image source: Getty Images.
Robotic surgery continues to grow more popular
The most attention-grabbing factor in Intuitive's preliminary earnings report is its revenue growth.
If the company's prior performance during the pandemic is any indication, its top line will continue to face pressure from its customers in healthcare being forced to cancel surgeries in order to preserve their capacity to treat patients suffering from COVID-19.
But, in contrast to 2020, the pandemic didn't seem to be a major drag on sales last year. Per its preliminary results, in 2021 Intuitive brought in $5.71 billion in revenue, a 31% increase over 2020's total. That was made possible by a strong rebound in da Vinci procedures, which grew by 28% year over year. Furthermore, hospitals are still purchasing da Vinci units, with 44% more sold last year in comparison to 2020's total.
Importantly, all of these metrics are trending in the right direction even when accounting for the detrimental impact of the pandemic. Compared to the fourth quarter of 2019, Da Vinci procedures grew at a compound annual growth rate (CAGR) of 13% in the last three months of 2021. Quarterly revenue expanded with a CAGR of 10% in the same period.
While those growth rates aren't exactly phenomenal, they should give investors a measure of confidence in the company's long-term potential, assuming that these figures don't change much when the full earnings report comes out. If Intuitive can plod along throughout major disruptions and continue to build on its revenue base by double digits each year, once conditions improve, it'll be ready to be a soaring growth stock once again.
What's new with Intuitive Ventures?
Another thing that investors should keep an eye out for in the full earnings report is any update relating to Intuitive Ventures, the venture capital arm which Intuitive founded in late 2020 to seed the minimally invasive care landscape with new technology companies.
Intuitive Ventures has made a trio of investments so far, two of which are in companies developing software platforms. The third business is working on an endoscopic procedure that can help to treat type 2 diabetes.
What's notably absent is any investment in technologies that are directly relevant to making new robotic surgery hardware. While there's no inkling of such an investment being in the works or even on the table, it would be a positive sign that Intuitive is allocating its capital in areas that are highly likely to generate returns in its core business.
Nonetheless, if management doesn't provide an update on Intuitive Ventures in the full earnings report, it won't be a bad sign. Developing new technologies takes time, and there's no need for Intuitive's investments to start yielding income to support growth anytime soon.
Viral obstacles to growth are likely to persist
There's still a wild card in play which management might address in the full earnings update, however.
While Intuitive's sales and procedure volume fared well amid the coronavirus variants spreading in 2021, the omicron variant is significantly more infectious, and it seems to be putting hospital capacity under far more pressure. Management has already hinted that Q4's results were worse than they could have been without the variant's spread.
It's entirely possible that investors will see an unfortunate repeat of early 2020 for the company, with procedure volume and accessory sales plummeting in the first quarter as customers once again curtail elective surgeries to provision for surges in COVID-19 caseloads.
ISRG Revenue (Quarterly) data by YCharts
In particular, investors should pay close attention to Intuitive's profit margin and net income when the full earnings release drops. There's no mention of earnings in the preliminary report, nor is there in any of the unaudited financial statements the company provided as a sneak peek.
That could be a bad sign, but it's key to remember that any earnings drawback is likely to be transitory, assuming the pandemic ebbs. So, even if earnings don't look to be growing as strongly as revenue at the moment, it's probably a good idea to hold onto your shares -- or perhaps even buy more, if you're in a position to do so.
