Will Direct Distribution in Southern Europe Boost ISRG's Margins?

Intuitive Surgical ISRG is set to overhaul its go-to-market model in Southern Europe, announcing plans to transition to direct distribution in Italy, Spain and Portugal in 2026. The move, which involves transferring roughly 250 employees from distributors to Intuitive Surgical’s own payroll, marks a notable regional strategy shift aimed at improving profitability and tightening market control. By cutting out third-party distributors, ISRG stands to capture economics that were previously shared, particularly on high-margin recurring streams such as instruments, accessories and service contracts. Management has already indicated that the transition should be slightly accretive to pro forma earnings, as the elimination of distributor margins more than offsets the added cost base from employee transfers. Over time, direct sales could also support more disciplined pricing, better contract standardization, and closer alignment between capital placements and procedure growth.Beyond near-term margin capture, the strategic upside is operational. Southern Europe remains underpenetrated relative to the United States, with utilization rates well below domestic levels. Direct control allows ISRG to more tightly integrate training, service responsiveness, and digital offerings, such as da Vinci upgrades, potentially accelerating utilization and pull-through of recurring revenues. It also gives the company clearer line of sight into hospital demand, budgeting cycles, and competitive dynamics — critical in cost-conscious European markets.However, execution risk should not be dismissed. Absorbing a large workforce transfer brings integration challenges, from harmonizing compensation structures to maintaining commercial momentum during the transition. Distributors typically offer deep local relationships and institutional knowledge, so any disruption could temporarily slow system placements or service responsiveness. In addition, near-term operating expenses will rise as ISRG builds out local infrastructure, which may pressure margins before the benefits fully materialize.Peer Progress in EuropeStryker SYK continues to deepen its European footprint by leveraging proven U.S. platforms and accelerating international launches. In the third quarter, Stryker delivered solid international growth, supported by strong demand in developed and emerging markets, and highlighted Europe as a priority geography for long-term expansion.Stryker recently launched the LIFEPAK 35 in Europe, reinforcing its emergency care portfolio. Global Mako installations reached record levels, underscoring Stryker’s strategy of exporting high-utilization robotic platforms beyond the United States. Stryker’s broad infrastructure, disciplined pricing and expanding product cadence position it to steadily gain share across European hospital systems over the coming years.Zimmer Biomet ZBH is recalibrating its European strategy as part of a broader international reset. Zimmer Biomet acknowledged late-quarter weakness in parts of Eastern Europe, caused by distributor order volatility, prompting leadership and governance changes across certain international markets. At the same time, Zimmer Biomet is laying groundwork for renewed growth by prioritizing higher-impact launches and tighter commercial execution across EMEA.Zimmer Biomet cited favorable order timing in Europe and new product introductions as contributors to international performance, while emphasizing a more measured approach to guidance and distributor reliance. Going forward, the company aims to stabilize execution, sharpen accountability and make selective investments to rebuild momentum across Europe.ISRG’s Price Performance, Valuation and EstimatesShares of ISRG have gained 9.3% in the past six months compared with a 16.8% rise for the industry.Image Source: Zacks Investment ResearchFrom a valuation standpoint, Intuitive Surgical trades at a forward price-to-earnings ratio of 58.4, above the industry average. But, it is still lower than its five-year median of 71.52. ISRG carries a Value Score of F.Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for Intuitive Surgical’s 2025 earnings implies a 17.3% rise from the year-ago period’s level.Image Source: Zacks Investment ResearchThe company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Zacks Naming Top 10 Stocks for 2026Want to be tipped off early to our 10 top picks for the entirety of 2026? History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2025, the Zacks Top 10 Stocks gained +2,530.8%, more than QUADRUPLING the S&P 500’s +570.3%.Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2026. Don’t miss your chance to get in on these stocks when they’re released on January 5. Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Stryker Corporation (SYK): Free Stock Analysis Report Intuitive Surgical, Inc. (ISRG): Free Stock Analysis Report Zimmer Biomet Holdings, Inc. (ZBH): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks