Can ISRG's Strong Q2 Procedure Volume Translate Into Durable EPS Upside?

Core Insights - Intuitive Surgical (ISRG) reported a strong second-quarter 2025 performance with procedure volumes increasing by 17% year over year, driven by growth in general surgery and gynecology, particularly in hernia repair, bariatrics, and colorectal procedures [1][9] - Despite robust procedure growth, gross margin declined by 200 basis points to 67.9% due to higher component and logistics costs, foreign exchange pressures, and a higher mix of new platforms like da Vinci 5, which have lower margins [2][9] - The company placed 395 da Vinci systems in the second quarter, with a growing mix of operating leases that may depress near-term revenue but provide long-term recurring benefits [3] - ISRG reiterated its 2025 margin guidance of 66-67% and emphasized operational efficiency improvements through automation, scale, and digital tools [4][9] - Near-term EPS expansion will depend on managing margin pressures from foreign exchange, inflation, and platform mix, but operational efficiencies could lead to durable EPS growth [5] Peer Performance - Globus Medical (GMED) reported strong first-quarter 2025 results with net sales of $598.1 million and adjusted EPS of 68 cents, benefiting from integration with NuVasive and volume-driven growth in musculoskeletal solutions [6] - Zimmer Biomet (ZBH) achieved first-quarter 2025 sales of $1.91 billion, a 2.3% increase at constant currency, with adjusted EPS of $1.81, despite modest EPS pressure from tariffs and acquisition costs [7] Valuation and Estimates - ISRG shares have declined by 6.4% year-to-date, compared to the industry's decline of 7.7% [8] - The company trades at a forward price-to-sales ratio of 16.7, above the industry average but below its five-year median of 17.1, with a Value Score of D [11] - The Zacks Consensus Estimate for ISRG's 2025 earnings suggests a 6.8% increase from the previous year [12]