Why Intuitive Surgical Keeps Growing and Growing

Medical device maker Intuitive Surgical (NASDAQ: ISRG) is a great example of the adage "winners win" in the stock market. With its razor-and-blades model and Da Vinci robot, the company continues to grow, benefiting from an aging U.S. population and increased demand for elective surgeries.

In this episode of "Beat and Raise" recorded on Jan. 20, Fool contributors Danny Vena and Brian Withers talk about Intuitive Surgical's fourth-quarter earnings report, and why the medical device maker is a good bet to continue putting up solid growth.

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Brian Withers: Well I'm excited to hear about Intuitive Surgical. How'd they do?

Danny Vena: I was looking at the results here just moments ago and it doesn't look bad at all. Let me go ahead and get my screen share going here and give you the slideshow here. Essentially, it was a beat across the board, if only by a small amount. Fourth-quarter revenue came in at $1.55 billion. Analysts were expecting about $1.52-$1.53 billion, so growth of about 17%. That's a little bit on the lower end of what Intuitive Surgical typically delivers during a quarter but also, this is historically a slow quarter. The fourth quarter is when you have the holidays, kids are back in school and people aren't scheduling a lot of surgeries, so it's not too big of a surprise there.

Their adjusted earnings per share of $1.30 was up 9%. That was also a beat. Analysts were expecting something around $1.24-$1.28. That's also just slightly above what expectations were. Now, the company did not provide any outlook for 2022 yet. Again, that's not surprising at all considering we're barely into the year. The company usually waits until some time within the first quarter before they provide any forecast for the coming year. There were some other positive signs in their earnings release. The company shipped 385 of its da Vinci surgical systems. That was an increase of 18 percent year-over-year, so that's a solid number for them. Their installed base of machines was up 12 percent, and then some of the other metrics that the company provides that are really good for investors to know because the company earns money in a couple of different ways.

It earns money not only from the sales of its machines and conversely, the procedures that are done on those machines, which creates additional demand. But also it sells instruments and accessories that are disposable. As surgeons use the machine more often than they sell more instruments and accessories, so that's also a good indicator of how things are going. The installed base of machines up 12 percent, the number of procedures up 19 percent, instruments and accessories up 13 percent, and all-in-all, systems revenue was up 28 percent. This is all pretty solid what we've come to expect from Intuitive Surgical. It wasn't a barn-burner but it wasn't slow by any means either. A couple of things I noticed when the market first saw the results, the stock was up about three, three-and-a-half percent, just before I got ready to come on the air, the stock was down about three, three-and-a-half percent.

Investors really haven't had a chance to really look at those numbers and decide exactly how they want to take that. I would say the fact that this was a quarter where the omicron variant was rampant, the fact that the company delivered solid results across the board. They beat on the top and bottom line. They had solid results across all of the segments that we normally track. I would say it was exactly what Intuitive Surgical needed to do regardless of what the stock price does.

Brian Withers: Yeah. I was surprised. To me, those are super solid results. You mentioned omicron and I know that a number of hospitals have been shutting down elective procedures and things, and so you would think about spending on these expensive robots. It's great that they sold almost 400 of their robots, which is always a positive sign that that's growing and there's tons of future revenue going forward on that. I feel like they knocked it out of the park and unless their outlook and they come in on theearnings calland talk about maybe weakness they're seeing in the upcoming quarter, this one's just keep on rocking.

Danny Vena: Yeah. This is a company that continues to deliver solid, if not robust growth quarter-after-quarter, year-after-year. This is a stock that I've owned for nearly a decade and I will probably own it for another decade.

Brian Withers: Danny, I think you're a little smarter than I was. I sold this one a while back as I went more into SaaS companies. After I sold them, I didn't think they could get much bigger and they've continued to grow in solid double-digit rates both in the top and the bottom line.

Danny Vena: Absolutely.

Brian Withers has no position in any of the stocks mentioned. Danny Vena owns Intuitive Surgical. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns and recommends Intuitive Surgical. The Motley Fool recommends the following options: long January 2022 $193.33 calls on Intuitive Surgical and short January 2022 $200 calls on Intuitive Surgical. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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