3 AI and Robotics Stocks Leading Innovation

Since the 1950s, robots have sparked our imaginations, promising to handle mundane tasks and free us for more meaningful activities. Far from replacing humans, modern robotics and AI innovations, like ChatGPT, have accelerated the adoption of automation in organizations, transforming how we work.

Amidst this dynamic landscape, investors could consider buying fundamentally sound AI and robotics stocks, such as Intuitive Surgical, Inc. (ISRG), Rockwell Automation, Inc. (ROK), and Teradyne, Inc. (TER), which are at the forefront of innovation.

In manufacturing and warehousing, industrial robots are boosting productivity, streamlining operations, and redefining traditional job roles. For instance, in 2023, a record 44,303 industrial robots were deployed to U.S. manufacturers, marking a 12% increase from the previous year. The automotive sector spearheaded this adoption, accounting for 33% of installations, followed closely by the electrical and electronics industry at 12%.

Beyond manufacturing, AI and robotics are catalyzing advancements in healthcare and diagnostics. With advancements in artificial intelligence and data analytics, diagnostics are becoming more precise, treatment times are shrinking, and personalized medicine is becoming a reality.

‘Smart laboratories’ equipped with AI-driven robotics are minimizing human intervention and optimizing decision-making while maximizing predictive capabilities for disease outbreaks and public health decisions.

According to Statista, the AI Robotics market is projected to reach $20.43 billion in 2030, growing at a CAGR of 23.9%. In 2024, the United States alone is projected to account for $5.64 billion of this market size, underscoring its pivotal role in the global AI robotics landscape.

With that in mind, investing in robotics company stocks such as ISRG, ROK, and TER could be lucrative in the years ahead. Let’s look into their fundamentals in detail:

Intuitive Surgical, Inc. (ISRG)

ISRG designs, manufactures, and markets primarily the da Vinci surgical system and Ion endoluminal system and related instruments and accessories for invasive surgery worldwide. The company is known for its da Vinci surgical system, designed to assist surgeons in performing minimally invasive surgeries.

On March 14, 2024, the company received FDA clearance for its next-generation da Vinci 5 multi-port robotic system, applicable to all surgical specialties and procedures indicated for da Vinci Xi, with some exceptions. Such approval expands ISRG's market reach and reinforces its leadership in robotic-assisted surgery.

In January 2024, ISRG also obtained CE mark certification for its da Vinci single-port (SP) surgical system for various surgical procedures. The planned rollout of the SP system in major European countries throughout 2024 will likely boost the company's presence in international markets, driving growth and enhancing its competitive edge.

In the fiscal first quarter ended March 31, 2024, ISRG’s total revenue increased 11.5% year-over-year to $1.89 billion. The company’s non-GAAP gross profit stood at $1.28 billion for the quarter, up 12.1% from the prior-year period. Its non-GAAP income from operations came in at $630 million, indicating a 17.8% rise from the prior-year period. While its non-GAAP net income increased 23.8% year-over-year to $541.10 million, its non-GAAP EPS grew 21.9% to $1.50.

During the quarter, worldwide da Vinci procedures increased by 16% year-over-year, and ISRG placed 313 da Vinci surgical systems, similar to the 312 systems in the first quarter of 2023. As of March 31, 2024, ISRG's installed base of da Vinci surgical systems grew to 8,887 systems, up 14% from 7,779 in 2023.

The consensus revenue estimate of $1.97 billion for the fiscal second quarter (ending June 2024) represents a 12.3% increase year-over-year. The consensus EPS estimate of $1.54 for the current quarter indicates an 8.5% improvement year-over-year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.

Over the past nine months, the stock has surged 52.1%, closing the last trading session at $432.6. Also, it has gained 28.2% year-to-date.

ISRG’s stance is apparent in its POWR Ratings. The stock has a grade B for Stability, Sentiment, and Quality. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Among the 131 stocks in the Medical - Devices & Equipment industry, it is ranked #47. Click here to access additional ISRG ratings (Growth, Value, and Momentum).

Rockwell Automation, Inc. (ROK)

ROK offers industrial automation and digital transformation solutions in the U.S. and internationally. The company operates through three segments: Intelligent Devices; Software & Control; and Lifecycle Services. It provides hardware and software products and services, network and security infrastructure solutions, and consulting and professional services.

On June 3, ROK announced expanded collaborations with NVIDIA Corporation (NVDA) to enhance industrial AI mobile robots for improved safety and efficiency. This partnership extends efforts to integrate AI into manufacturing by focusing on autonomous mobile robots (AMRs) using NVDA's Isaac robotics platform. This initiative aims to optimize factory performance and operational efficiency, unlocking new potential in industrial automation.

Additionally, the company continues to integrate NVIDIA Omniverse Cloud APIs with its Emulate3D software, enabling data interoperability, live collaboration, and photo-realistic graphics for digital twins of production systems.

ROK’s net sales for the second quarter ended March 31, 2024, amounted to $2.13 billion, with a 13.9% uptick in its Lifecycle Services segment from the prior year. Its gross profit increased 4.9% from the previous quarter to $833.40 billion. Its adjusted net income and non-GAAP EPS amounted to $288 million and $2.50, registering a 22% and 22.5% increase sequentially.

As of March 31, 2024, the company’s long-term debt decreased to $2.58 billion from $2.86 billion recorded on September 30, 2023.

Street expects ROK’s revenue for the fiscal year 2025 (ending September 2025) to increase 5.7% year-over-year to $9.06 billion. The company’s EPS for the next year is expected to rise 18% from the prior year to $12.

However, the stock has declined 4.4% over the past month to close the last trading session at $258.52.

ROK’s POWR Ratings reflect this prospect. The stock has a B grade for Quality and is ranked #65 out of 79 stocks in the A-rated Industrial - Machinery industry.

In addition to the POWR Ratings highlighted above, one can access ROK’s ratings for Growth, Value, Momentum, Stability, and Sentiment here.

Teradyne, Inc. (TER)

TER designs, develops, manufactures, and sells automated test systems and robotics products globally. It operates through four segments: Semiconductor Test; System Test; Robotics; and Wireless Test. Its robotics offerings include collaborative and mobile robots that help manufacturers of all sizes increase productivity, improve safety, and lower costs.

On March 19, TER Robotics, which includes Universal Robots (UR), a collaborative robot (cobot) company, and autonomous mobile robot (AMR) company MiR, announced a collaboration with NVDA to integrate new AI capabilities into automation applications.

The collaboration with NVDA aims to enhance the application potential of Universal Robots and optimize functionality across their robotics platforms, including the new MiR1200 Pallet Jack.

During the first quarter, which ended March 31, 2024, TER’s revenue amounted to $599.82 million, exceeding its high-end guidance of $590 million. The company’s adjusted income from operations and non-GAAP net income amounted to $88.60 million and $82.50 million, respectively. Moreover, its non-GAAP EPS of $0.51 surpassed the high-end guidance of $0.38.

TER CEO Greg Smith attributed the strong performance to higher-than-expected demand for AI applications in memory and networking, alongside expected Robotics shipments. He also expects new products, applications, and global distribution channel improvements to fuel growth in Robotics for the rest of the year.

Buoyed by this, the company paid a quarterly dividend of $0.12 per share to its shareholders on June 14, 2024. TER pays $0.48 annually, which translates to a yield of 0.32% on the prevailing price level. It has raised its dividend payouts at a CAGR of 4.8% over the past three years.

Analysts expect TER’s revenue for the third quarter (ending September 2024) to increase marginally year-over-year to $714.26 million. The company’s EPS is expected to rise 7.2% year-over-year to $0.86 for the same quarter. Moreover, the company topped the consensus EPS estimates in each of the trailing four quarters.

Shares of TER have gained 55.3% over the past nine months and 36.8% year-to-date to close the last trading session at $148.45.

TER’s POWR Ratings reflect this outlook. It has an A grade for Momentum and a B for Quality. Out of 92 stocks, TER is ranked #53 in the Semiconductor & Wireless Chip industry. To see the other ratings of TER for Growth, Value, Stability, and Sentiment, click here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

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ISRG shares were trading at $434.14 per share on Monday afternoon, up $1.58 (+0.37%). Year-to-date, ISRG has gained 28.69%, versus a 15.14% rise in the benchmark S&P 500 index during the same period.

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.

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