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Despite concerns over sweeping healthcare law changes, the medical sector has actually been a solid performer so far this year. In fact, the main ETF for the space, the Health Care Select Sector SPDR (NYSEARCA:XLV) has easily outperformed the S&P 500 in the first half of 2013, trouncing the broad market by over 700 basis points.

However, some corners of the market could be facing troubles -- especially in the medical device and equipment space -- with concerns over healthcare spending starting to take their toll on a number of companies in the space, as many are forgoing new purchases of equipment or buying less. One such company that has been the poster child of this trend and has seen its stock price suffer as a result is certainly Intuitive Surgical (NASDAQ:ISRG).

ISRG's Troubles in Focus

ISRG is probably best known for its da Vinci Surgical System, which helps surgeons to perform operations with increased precision and control. The basis of the system uses robotics, while there are HD 3D vision systems and proprietary instrument technologies as well.

Sales of this innovative device rose pretty much across the globe, though they struggled in the American market, according the preliminary Q2 earnings. Their key product saw only 90 sales in the U.S. market, compared to 124 a year ago, highlighting a very sluggish sales market (see also "Medical Device ETFs Slump On Intuitive Surgical Crash").

ISRG Outlook

This was especially troubling because the company pinned the lower sales on the difficult environment in the U.S., and the lack of hospital dollars for new technologies. This bearish outlook is driving the stock sharply lower, with prices for ISRG collapsing by about 14% in the past month alone. And with the poor outlook from company management, many analysts seemed to have no choice but to slash their expectations for the company in the near term. In the past week, eight estimates have been cut for the current and next quarters, as well as the current and next year periods as well.

The magnitude of the cuts has also been severe, with estimates for next quarter slumping from $4.25/share down to just $4.00/share. With growth now projected to be below the industry average for the next five years, there is also some concern that the firm is now making the difficult transition from a growth company to a value one, meaning there could definitely be some pain ahead for ISRG. Thanks to this bearishness from pretty much every analyst covering the company, ISRG has earned itself a Zacks Rank No. 5 (Strong Sell). This means that we are looking for the firm to continue to underperform, and experience more losses relative to other stocks in the next few months.

Better Picks

Currently, there aren't any companies that are top ranked stocks in the medical instruments industry. However, there are a few companies that have earned themselves Zacks Ranks of 2 or Buy and could be solid choices if you want to stay in the medical instrument sector.

Some buy ranked names in this space include Cepheid (NASDAQ:CPHD) and Globus Medical (NYSE:GMED), two firms that surprised last quarter and have seen their ranks jump from 3 to 2 in the past week alone, suggesting that they could be strong choices now as well. So consider these, or a few of the other better-ranked firms in the space, over the in trouble ISRG -- which could face more weakness if the market for their key product doesn't improve in the U.S. soon.

Cepheid: Free Stock Analysis Report (email registration required)

Globus Medical: Free Stock Analysis Report (email registration required)

Intuitive Surgical: Free Stock Analysis Report (email registration required)

Health Care Select Sect SPDR: ETF Research Reports (email registration required)

Source: Bear Of The Day: Intuitive Surgical