Intuitive Surgical, Inc. (ISRG), Johnson & Johnson (JNJ): This Health Care Stock Isn’t Out of the Woods

Over the past year, Intuitive Surgical, Inc. (NASDAQ:ISRG) has been mired in a mix of controversy pertaining to the safety of its revolutionary da Vinci surgical robots. Reports first leaked throughout the media questioning the safety of the company’s surgical systems. In fact, CNBC did a detailed report that brought the issue to the forefront of the financial media.

At the time, those fears were not yet substantiated. It wasn’t clear that the fears surrounding the da Vinci systems would have a negative effect on Intuitive Surgical, Inc. (NASDAQ:ISRG)’s fundamentals. Unfortunately, those fears were in fact realized on July 9, when the company warned investors its second quarter sales will likely disappoint. After an 18% drop in one day, the market is clearly panicking. Is the pervasive fear accurate? Or does the collapse in Intuitive Surgical, Inc. (NASDAQ:ISRG) now represent a buying opportunity?

Things just keep getting worse

There was bad news across the board in Intuitive Surgical, Inc. (NASDAQ:ISRG)’s preliminary second quarter update. The company advised investors that sales growth would come in at about 7% year over year in the second quarter, which would be well below analyst expectations.

Moreover, the company stated its volumes of procedures performed by the da Vinci robots would be hit by slower growth in benign gynecological procedures, due to fewer hospital admissions and a trend towards more conservative treatments.

All told, the warning served as a shock to the market, which now likely believes Intuitive Surgical, Inc. (NASDAQ:ISRG) is finally feeling the effects of widespread doubt as to the safety and cost-effectiveness of its da Vinci robots.

Intuitive Surgical, Inc. (NASDAQ:ISRG) isn’t the only surgical device maker falling on hard times. MAKO Surgical Corp. (NASDAQ:MAKO) has had its own share of problems in recent quarters. The company is struggling to maintain profitability, even though it is reporting strong revenue growth.

To illustrate, MAKO Surgical Corp. (NASDAQ:MAKO) reported 26% first-quarter revenue growth. However, MAKO Surgical Corp. (NASDAQ:MAKO) was unable to turn a profit, losing nearly $10 million during the quarter, or $0.21 per share. This was worse than analyst expectations, which called for a net loss of $0.19 per share.

Not for the faint of heart

Intuitive Surgical used to be a favorite among investors for racking up double-digit quarterly sales and profit growth like clockwork. Investors long favored it and awarded it a valuation profile usually reserved for the market’s best growth stocks.