After all the trouble that Covid caused for the med-tech sector, one innovative leader is on its way to coming back better than ever. Nothing proves that better than their recent beat-and-raise quarter.
For the March quarter, the firm earned $3.52 per share, up 31% and crushing forecasts. Analysts had expected per-share profits of $2.64, or 25 less than the actual results.
With the Covid recovery underway, the company raised guidance for the full year. It now expects growth in robotic procedures of as much as 26% for all of 2021, compared with Wall Street’s 18% forecast.
This medtech firm specializes in sophisticated gear for robotic surgeries, during Covid, a huge amount of the $1.1 trillion US healthcare market was focused on treating coronavirus cases.
That meant that elective surgeries for the fiscal year ended in March were pretty much out the window, and the companies that target them fell out of favor.
But now, all of that is in the rearview mirror.
Instead, this company just reminded tech investors of the great value proposition here by easily beating Wall Street forecasts.
With that news as a spark, the stock jumped 9.9% in a single session on May 21. It’s now back in a nice uptrend.
Now then, don’t worry if you never heard of Gary Guthart. Most investors haven’t.
But he has been running the robotic surgery leader for more than a decade. He grew up in Silicon Valley and later got his doctorate degree in engineering from the California Institute of Technology.
Talk about a visionary leader. Guthart was early to the robotic surgery game, becoming the firm’s eleventh hire back in 1996. As CEO he has built a great company.
But you don’t have to take my word for it. This firm’s products and procedures have been chronicled in no less than 21,000 peer-reviewed articles.
Despite the fact that he is far from a household name, he has gotten some terrific publicity over the years.
In 2019, Fortune listed him as a Businessperson of the Year. And last year, he was the subject of a flattering profile in Investor’s Business Daily.
And while earned media does wonders for building the brand, a beat-and-raise quarter really really grabs attention on Wall Street and among institutional investors.
That’s exactly what we get with Intuitive Surgical Inc. (ISRG). The firm is widely revered for its da Vinci advanced robotic systems for minimally invasive surgery.
Launching back in 1995, the firm’s equipment has been used in more than 8.5 million procedures worldwide. It has sold nearly 5,989 of its da Vinci systems in clinical use at a cost often exceeding $1.5 million.
For the quarter ended in March, the company showed an amazing rebound from the Covid-fueled sales slowdown.
During the period, procedures using the da Vinci system rose 16%. Not only that, but Intuitive shipped 298 new robotic systems to customers, a 26% increase.
Behind The Headlines
I believe these results prove a key point I like to make with investors. To make big money in tech stocks, you have to go behind the headline news.
Yes, with a company like Intuitive that can be difficult when its sector and its industry are so out of favor.
See, medtech stocks have gotten hit on the belief that with the Covid lasting months longer than expected, these firms will lag the general economy’s rebound.
Consider that the stock sold off at the end of last year and remained under pressure for several months.
To be fair, the company did hurt itself a bit. When it reported earnings last January for 2020’s fourth quarter, the company did not offer 2021 guidance.
That, however, was true for hundreds of companies well beyond healthcare and high tech.
But now, as analysts and investors have reawakened to the great growth story here, the stock is back in a nice uptrend.
I’m not surprised. Truth be told, the firm is targeting a trend that is simply exploding. Doctors and patients are looking for quality operations with reduced chances for human error and with minimal side effects and recovery time.
Acumen Research and Consulting says the market for minimally invasive surgery will grow by 9.6% a year through 2026. At that point, the market will be worth $33.8 billion.
And Intuitive is well placed to take advantage of this trend. All we have to do is take a look at how well the firm has done despite Covid’s impact.
Last year alone, it deployed another 936 Da Vinci systems. Also in 2020, the company’s equipment was used in more than 1.2 million operations as it received coverage in a stunning 3,000 peer-reviewed scientific journals.
The company officially projects its equipment can be used in roughly 6 million surgeries. But the firm is moving into “soft tissue” procedures like those for tendons and muscles that will more than triple its market to 20 million procedures.
Now you know why I think the stock still faces plenty of upside and continue to recommend it. No doubt, earnings growth had lagged over the last three years.
But the firm is now expected to grow profits by 32% this year. Just to be conservative, let’s cut that forecast back by 30%.
We’d still have a very respectable average earnings growth of 22.4%. At that rate, per-share profits should double in roughly 3.25 years.
And we have empirical data to show the long-term value here.
Data compiled by Yahoo Finance shows the S&P 500 rose 102.2% over the past five years. But ISRG nearly tripled that, coming in at 304.2%
With so much upside ahead, this is the kind of tech leader that can greatly improve the value of your portfolio for years to come.
That value can go even higher thanks to another powerful moneymaking trend in medicine that is picking up momentum, and that could become even bigger in the next few years.
Cannabis legalization, for medical and even recreational use, is spreading across America and the sector is expected to grow by more than 10,000% in the next few years.
You can see how to take the maximum possible advantage of this right here.
Cheers and good investing,
Michael A. Robinson