Intuitive Surgical leads S&P 500 gainers as analysts welcome bullish guidance for 2024

By Ciara Linnane

Maker of robotic surgical equipment expects worldwide procedures using its da Vinci machine to rise 13% to 16% in 2024

Shares of Intuitive Surgical Inc. rallied 9.5% Wednesday to lead S&P 500 gainers, after the maker of robotic surgical equipment updated guidance for fourth-quarter sales with some bullish numbers, buoyed by a recovery in China.

The stock (ISRG) was on track for its biggest one-day gain since April 19, 2023, when it rose 10.9%, and has gained for four of the last five days.

The company said late Tuesday it expects fourth-quarter revenue of around $1.93 billion, up 17% and above FactSet forecasts for $1.87 billion.

Procedures involving da Vinci, its robotic surgical system, jumped 21% from a year earlier, when COVID-19 cases re-emerged in China and weighed on procedures overall.

Through last year, executives said, procedures in China rebounded as COVID-19 infections and hospitalizations fell.

In the U.S., the company said, general surgery procedures drove usage of da Vinci through 2023, while cancer procedures led to more use outside the U.S.

The company is now expecting worldwide da Vinci procedures to rise 13% to 16% in 2024.

Truist said the 2024 guidance was better than expected and comes from a company that tends to be conservative early in the year.

"We (and we believe some investors) were braced for a more conservative initial '24 procedure range in the 11-15% range, so a higher initial 'starting point' is likely to be well-received," analysts led by Richard Newitter wrote in a note to clients.

Truist, which rates the stock a buy, said investor focus remains on a new system launch, but that it doesn't expect any updates on that when the company presents at a competitor conference tomorrow.

"For our part we still think a new system will be announced by year-end 2024, and we would rather be early than late ahead of that key catalyst," the analysts wrote.

JPMorgan, which also rates the stock the equivalent of buy, said the 2024 guidance seems a reasonable benchmark for outperformance over the balance of the year.

"We hope to get more color on what's assumed in this guidance range at the top- and bottom during the presentation and our call with management, though we can see this range ultimately proving conservative as our channel checks continue to point to strong underlying volumes, which should continue over the course of the year," said analysts led by Robbie Marcus.

The JPMorgan team will be focused on those matters, as well more detail on the international outlook, especially for China.

"We'll look for more on procedure outlook by geography and changes in competitive dynamics when ISRG reports full 4Q23 results Tuesday January 23," Oppenheimer analysts wrote in a note to clients.

Other analysts are also bullish on the stock with 17 of 25 analyst views compiled by FactSet equal to buy. The remaining eight are holds.

The stock has gained 34% in the last 12 months, while the S&P 500 SPX has gained 22%.

Read now: Investing in Robots Isn't Automatic. Here's Where to Start.

-Ciara Linnane

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01-10-24 1441ET

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