Intuitive Surgical Banks On Da Vinci X, Forex Woes Remain

On Dec 20, we issued an updated research report on Intuitive Surgical Inc. (NASDAQ:ISRG) . Growing adoption of the company’s da Vinci system, increasing procedure volumes, strategic acquisitions, continuous innovation and solid recurring revenue base are key catalysts. The stock has a Zacks Rank #3 (Hold).

Intuitive Surgical is the manufacturer of the da Vinci surgical system (an advanced robot-assisted surgical system) and related instruments and accessories. The system enables minimally-invasive surgery that helps avoid trauma associated with open surgery. In the last quarter, Intuitive Surgical launched two additional instruments and accessories for da Vinci X and Xi platforms in seven countries.

Notably, the company initiated a limited launch of a refined vessel sealer in Europe in the quarter. Management announced plans to file the first 510(k) for FDA approval of da Vinci SP program by 2017,and submissions for additional indications thereafter.

For 2018, Intuitive Surgical has strong opportunities in the U.S. general surgery market, particularly driven by procedures for hernia repair and colorectal surgery. Internationally, the company has significant opportunities in Japan, South Korea and China.

On the flip side, foreign exchange movements are affecting the company’s results. Though Intuitive Surgical generates a major portion of revenues from the domestic market, continued investments in international businesses are widening the company’s exposure to international markets. Hence, unfavorable foreign exchange is a major concern for 2018.

Further, the Medical Product space, has been a precarious game for the Republicans since day one, courtesy of President Trump’s repeated failure to repeal and replace Obamacare. However, major MedTech players like Intuitive Surgical have been pinning their hopes on Trump’s promise to abolish the infamous 2.3% medical device sales tax, though its elimination is far from being achieved.

In this regard, let us not forget the massive chaos in the MedTech space triggered by the failure of the first Republican healthcare bill which was proposed this summer. The so-called American Health Care Act (AHCA) failed to garner support in the House owing to solid opposition from conservative and moderate lawmakers. The persistent uncertainty has given rise to concerns regarding the sustainability of MedTech companies, including Intuitive Surgical.

Investors’ optimism has been growing, thanks to President Trump’s promise of ‘enactment of new tax reforms’. However, the market has not benefited due to the lack of favorable developments in the regulatory front. Notably, this tax had been suspended for two years and is likely to be put into effect again on Jan 1, 2018.

Shares Shine Bright

Intuitive Surgical’s price movement has been robust over the last three months. The company represented a solid return of almost 6.8%, comparing favorably with the r industry’s rally of just 2.9%. The current level is a bit lower than the S&P 500 index’s gain of 8%.

Key Picks

A few better-ranked stocks in the broader medical sector are PetMed Express (NASDAQ:PETS) , Luminex Corporation (NASDAQ:LMNX) and IDEXX Laboratories (NASDAQ:IDXX) .

PetMed Express flaunts a Zacks Rank #1 (Strong Buy). The company has a long-term expected earnings growth rate of 10%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Luminex yielded a return of 6.4% over the last year. The stock flaunts a Zacks Rank #1.

IDEXX Laboratories has a long-term expected earnings growth rate of 19.8%. The stock rose 39.2% over a year’s time and carries a Zacks Rank #2 (Buy).

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