Why Intuitive Surgical Stock Was Pulling Back Today

Motley Fool
01-25
  • Intuitive Surgical easily beat estimates on the top and bottom lines.
  • Guidance was a bit lighter than investors wanted.
  • The stock is expensive, which helped trigger the sell-off.

Shares of Intuitive Surgical (ISRG -3.67%) were pulling back today as a strong fourth-quarter earnings report didn't seem to be enough to justify the medical device maker's lofty valuation. Its guidance for 2025 was also slightly below estimates, which can often trigger a sell-off for growth stocks.

As of 10:20 a.m. ET on Friday, the stock was down 3.9% on the news.

Image source: Getty Images.

Intuitive Surgical delivers strong results

Like clockwork, the maker of the da Vinci surgical robots delivered another strong round of growth up and down the income statement as its razor-and-blades business model and its industry leadership continue to pay off.

Da Vinci procedures in the quarter rose 18%, and it sold 493 surgical systems, up from 415 in the quarter a year ago, bringing its installed base to 9,902, up 15% from a year ago. Overall revenue rose 25% to $2.41 billion, which was well ahead of the consensus at $2.24 billion.

Growth was well balanced between instruments and accessories and surgical systems. And its new Ion Endoluminal System, which does bronchoscopies (lung examinations via a fiber optic camera), is surging with 70% growth in procedure volume.

Results were strong on the bottom line as well, with adjusted earnings per share jumping from $1.60 to $2.21, topping expectations at $1.79.

Guidance was on the light side

The stock seemed to sell off because its 2025 guidance indicated a slowdown from last year.

Intuitive Surgical expects procedure growth of 13% to 16%, which compared to the Wall Street consensus of 16%, and was below the 17% growth in 2024. Management also sees its adjusted gross margin slipping and adjusted operating expense growth increasing.

Those numbers indicate both a slowdown in revenue growth and narrowing margins, but there's a good chance the guidance is conservative since the company has a history of raising guidance over the course of the year and this is just an initial forecast.

The stock is also expensive, at a price-to-earnings ratio of around 80, though Intuitive Surgical deserves a premium. While that valuation may challenge the stock's growth this year, it still looks like a winner over the long term.

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