Intuitive Surgical Inc. (ISRG)

EPS of $1.84 beat estimates of $1.64; revenue of $2.04B beat estimates of $2.00B. Intuitive Surgical's 3Q earnings show strong momentum in the adoption of its latest surgical robotic technology and margin expansion, with further potential upside as utilization expands. The quarter's 18% procedure growth beat estimates for 17.1%, with gains in the installed base and system utilization easily compensating for bariatric procedure declines. The 379 da Vinci placements in 3Q, including 110 of the new Da Vinci 5 robots, surpassed estimates. This trend makes Intuitive's procedural volume growth guidance of 16-17% look conservative as it only raised the low end of the range. Operating margin of 37% exceeded analyst estimates of 34.8%, with management citing operating leverage as it updated its 2024 operating expense growth outlook to 10-12% year-over-year, from 10-13% previously. Things continue to look very good here. 
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The beat top and bottom, crushing earnings today--and they can still run higher when they use AI with their Da Vinci surgical products.

Considering it is nearly a global monopoly, we would be comfortable at 5%. 
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The GLP-1 weight loss companies are really in the sweet spot. For example for LLY, a very large holding for him, the opportunity for them is a very large marketplace. Getting approval for a broader range of uses. 

He also owns ISRG, which will help with the cost of healthcare, a very big growth opportunity. He owns MCK too.

Those 3 names together make up a 5% weight for him, which is underweight the market.

Last week, it reported a great quarter, its shares reversing a sell off earlier this month. Revenues are 14% YOY, non-GAAP EPS 25% YOY and beat revenues. They raised their guidance and cut their operating expenses outlook. Surgeries have been increasing along with use of ISRG's surgical equipment, such as up 22% outside the US and 14% in the US. Caveat: it trades at 70x PE, but it's always been high, in early 2021 at 85x forward and averages 58x PE. They've beaten the last 6 quarters. He believes in it. Buy on pullback, typically in August -September.

Last year, non-emergency medical procedures finally caught up after Covid and are now at higher than average levels. ISRG makes surgical robots for minimally invasive procedures. It's rallied 52% since October's lows. They recently pre-announced a blow-out quarter.

Their story is about the hardware, but going forward it will be about improving software. It's outperformed healthcare peers. It's a core holding for those who believe in applying tech to healthcare.

Revenue of $1.74B rose 12% year over year, but missed estimates of $1.77B slightly. Instruments and accessories revenue rose 23%, but systems sales fell 11%, Worldwide procedure growth was 19%, vs 20% last year and estimates of 19.4%. Installed base rose 13%. Adjusted EPS was $1.46, vs estimates of $1.41. Intuitive Surgical's results may put the focus on the equipment-leasing impact, but that shouldn't overshadow total placement and procedure volume trends showing increased utilization of its robotic system. The share of robots leased over several years, instead of purchased outright, rose to 52% vs. 37% a year ago. Still, procedure growth was strong year over year, including continued double-digit gains in bariatric surgeries despite patients trying weight-loss drugs. New da Vinci placements were 312 for 3Q, ahead of expectations for 305. The results led Intuitive to raise its 2023 procedure guidance to 21-22% year-over-year growth vs. 20-22% previously and bracketing consensus of 21.5%. We would consider the results good. 
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Has many tailwinds. Likes it. But for healthcare overall, the biotech sector has been awful this year. Doesn't know when this will lift, but biotech is holding back healthcare.

Company has performed very well the past year.
Excellent business model with high cash flow margins.
Long growth runway.
Has recently sold due to high share price valuation (60x P/E ratio).
Better names in sector with cheaper valuation.

Good company, strong growth area. Medical device technology is changing rapidly, and competition will increase, but this company has an edge. He prefers SYK because of its diversification.

He is still waiting to get into a position. You are paying a higher multiple for 20% annualized growth. It is dominant in robotic assisted surgery devices which improve surgery results. It is a $20 billion market which is expected to double in the next few years. Higher growth stocks do get impacted by higher interest rates.

Soared during lockdowns, but got obliterated when the Fed declared war on inflation and names like this got hit. It lost more than half its value and has rebounded partly. Early this year, they pre-announced disappointing number though the company is still growing. Has a good track record over the past 10 years.