Edwards Lifesciences (EW) reported EPS of $0.58 in the third quarter of 2012, surpassing the Zacks Consensus Estimate by $0.02. Sales increased 8.5% to $447.9 million, in line with the preliminary result but lagged the original guidance of $465-$485 million. This was primarily due to lower-than-expected THV sales due to economic uncertainties in Europe, coverage issues for certain inoperable patients in US and later-than expected approval of Sapien in high-risk patients.
Given these headwinds, the company lowered its outlook for 2012. We prefer to avoid the stock and accordingly downgrade it to Underperform.
Edwards current trailing 12-month earnings multiple is 36.3. The stock is currently trading at 27.1x the 2013 EPS estimate of $3.21. Our target price is based on 24.6x our 2013 EPS estimate.
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