What To Expect From Intuitive Surgical’s Q3?

Intuitive Surgical (NASDAQ: ISRG) will report its Q3 2024 results on Thursday, October 17. We expect the company’s revenues to come in at $2 billion and adjusted earnings to be $1.60 per share, reflecting a top-line above, but earnings slightly below the consensus estimate. The company should continue to benefit from an overall growth in procedure volume and more placements of its new da Vinci 5 surgical platform. See our interactive dashboard analysis on Intuitive Surgical FY 2024Q3 Earnings Preview for more details on the company’s revenues and earnings for the quarter.

What Trends Will Drive Intuitive Surgical’s Q3 Results?

Intuitive Surgical benefited from placing more systems and da Vinci procedure volume growth. The company continues to expand its installed base, which results in the growth of recurring revenues, such as consumables. Intuitive Surgical has projected global da Vinci procedure volume growth to be 15.5%-17% in 2024. Not only do we expect a higher installed base driving the company’s consumables and services revenue, its operating margin is also expected to see slight growth, bolstering its bottom line.

How Did Intuitive Surgical Perform In The Previous Quarter? 

Intuitive Surgical’s revenue of $2.0 billion reflected a 6% y-o-y growth driven by a 17% rise in worldwide da Vinci procedure volume. The company placed 341 da Vinci systems during the quarter, including 70 da Vinci 5 systems, that were launched in the U.S. earlier this year. Intuitive Surgical’s total installed base increased 14% y-o-y to 9,203 systems in Q2. The company’s operating margin expanded around 340 bps to 28.2% in Q2. The company’s bottom line stood at $1.78 on an adjusted basis, reflecting a 25% increase over the prior-year quarter and well above our estimate of $1.55.

What Does This Mean For ISRG Stock?

ISRG has had a good year so far, with a 45% appreciation, 2x more than the broader markets. However, ISRG stock looks like it is appropriately priced. We estimate Intuitive Surgical’s Valuation to be $462 per share, slightly below the current market price of $480. Our forecast reflects a 20x P/S multiple, aligning with the stock’s average P/S ratio over the last four years.

Looking at a slightly longer term, the increase in ISRG stock has been far from consistent, with annual returns being more volatile than the S&P 500. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is much less volatile. And it 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.