ISRG Q1 Earnings Coming Up: Time to Buy, Sell or Hold the Stock?

Intuitive Surgical, Inc. ISRG is set to report first-quarter 2025 earnings on April 22. The Zacks Consensus Estimate for sales and earnings is pegged at $2.18 billion and $1.71 per share, respectively. Earnings per share estimates for ISRG have remained stable at $7.97 and $9.37 for 2025 and 2026, respectively, over the past 30 days. The company expects worldwide da Vinci procedures to increase approximately 13-16% in 2025, a trend that should have benefited the top line in the to-be-reported quarter.

Intuitive Surgical’s close peers, Thermo Fisher Scientific TMO and Medtronic MDT, are slated to announce their quarterly numbers in the upcoming few weeks. (Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.)

Estimate Movement

In the last reported quarter, ISRG delivered an earnings surprise of 24.86%. Its earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 14.97%.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Intuitive Surgical this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here, as you will see below.

ISRG has an Earnings ESP of 0.00% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors to Note

The Instruments & Accessories segment is likely to report robust first-quarter results on the back of several favorable factors, especially strong da Vinci procedure growth. Procedure volume is likely to have been driven by growth in U.S. general surgery and cancer procedures in ex-U.S. markets.

Meanwhile, the launch of the da Vinci 5 systems is bringing in additional system placements. ISRG received approval for da Vinci 5 in Korea in October last year. During the third quarter, the company received FDA clearance for 8-millimeter SureForm 30 stapler. These developments are likely to have aided top-line growth in the first quarter.

General surgery procedures have aided procedure growth in the U.S. market, while cancer procedures benefited ex-U.S. markets during the past two quarters. We expect this trend to have continued in the first quarter. Procedures with Ion platform are also likely to have exhibited robust growth. However, declining demand for bariatric procedures, especially in the United States, might have partially offset the positives.

Moreover, China's recovery, fueled by strong procedure growth following COVID-related setbacks in the past year, is likely to have boosted sales in the soon-to-be-reported quarter. However, tariff-related challenges are likely to have impacted sales in the country. Apart from China, rising adoption in Japan and India might have aided sales growth.

The Systems segment’s results are expected to reflect strong adoption of the newly launched da Vinci 5. In the fourth quarter, ISRG placed 174 da Vinci 5 systems in the United States, reflecting nearly 60% growth sequentially. The company’s strong system placements in the United States during the fourth quarter looks promising, a trend that is likely to have continued in the first quarter of 2025.

Intuitive Surgical, Inc. Price and EPS Surprise

Intuitive Surgical, Inc. price-eps-surprise | Intuitive Surgical, Inc. Quote

Moreover, robust system placements in the Asia-Pacific region are likely to have aided placement growth further. However, system placements in China are anticipated to have been under pressure amid delayed tenders and emerging domestic robotic systems.

Apart from improved system placements globally, segmental revenues are likely to have been aided by a higher average selling price per unit. Ion system placements should have remained strong during the quarter.

The Services segment’s quarterly results are expected to reflect strong adoption of ISRG’s digital products and services, including Intuitive App and Intuitive Hub.

Meanwhile, ISRG’s margins are likely to have improved due to cost reductions and fixed overhead leverage. Lower inventory reserves and reduced freight rates should have aided margins. However, depreciation expense is likely to have increased, hurting margins.

Meanwhile, analyst will be asking questions on the potential impact of U.S. tariffs on China and vice-versa in the upcoming quarters of 2025. The rising trade war between the world’s top two economies might have hit supply chains, potentially leading to a rise in costs as well as hurting top-line growth.

Price Performance & Valuation

Intuitive Surgical’s shares have declined 7.5% so far this year compared with the industry’s 12.6% decline. The company’s shares have also outperformed the S&P 500 Index’s decline of 10.6% and the Zacks Medical sector’s decrease of 5.7%.

ISRG has outperformed Thermo Fisher Scientific’s 17.8% decline but underperformed Medtronics’ 3.4% gain so far this year.

YTD Price Performance

Now, let us take a look at the value Intuitive Surgical offers to its investors at current levels.

Currently, ISRG is trading at a premium compared to its industry, with a forward 12-month P/E of 57.48X compared with the industry’s 26.59X. However, the current valuation came down from a five-year high of 96.05X but is higher than the five-year low of 41.90X. ISRG has traded at a premium to the industry valuation in the past five years, reflecting the company's higher growth prospects. However, the current Value score of D reflects a high valuation.

ISRG's P/E F12M Graph

Investment Thesis

Although the valuation remains high, Intuitive Surgical is likely to continue its strong performance in the rest of 2025, driven by continued growth in the company’s da Vinci procedure volume and strong Ion procedure growth. Improving procedure prices should aid in sales growth going forward. Increasing procedure volume, along with better system placements and services across all markets, should drive top-line growth this year.

The launch of da Vinci SP in Europe and da Vinci 5 in the U.S. market should continue to drive system placements higher. However, weakness in bariatric procedures and challenges in China are likely to offset growth in the upcoming quarters.

However, rising trade tension following the imposition of U.S. tariffs is likely to lead to uncertainty across the globe, which may affect ISRG’s performance as well. However, the company’s primary manufacturing facilities in the United States and Mexico should continue to support U.S. revenues in the upcoming quarters without any tariff risks. Meanwhile, a weak dollar can act as a tailwind for top-line growth.

Conclusion

We believe that investors should not rush into buying the stock now amid tariff uncertainty. Also, ISRG does not have a favorable Zacks Rank, and the Style Score of D does not reflect a major strength in the stock. The company’s high valuation may have factored in the strong fundamentals, including growth in procedures and installed base. Investors should add the stock to their watchlist and track it for a cheaper valuation.

While current shareholders should hold their position, new investors should wait for the stock to retract some of its recent gains, providing a better entry point. However, valuation may continue to remain expensive as ISRG plans to expand its efforts to place systems beyond the United States, increase utilization in existing U.S. accounts and expand into additional indications in the next two years.

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This article originally published on Zacks Investment Research (zacks.com).

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