What's in Store for Edwards Lifesciences (EW) in Q2? - Analyst Blog
Medical instruments giant Edwards Lifesciences Corp. EW, is slated to report its second-quarter 2015 earnings on July 28, after the market closes.
Last quarter, the company had delivered a positive earnings surprise of 7.69%. Impressively, Edwards’ earnings have outpaced the Zacks Consensus Estimate in all of the past four quarters, with an average beat of 11.47%. Let’s see how things are shaping up prior to this announcement.
Factors at Play
For the second quarter of 2015, Edwards expects total sales in the range of $580–$620 million and adjusted earnings per share of $1.00–$1.10. The Zacks Consensus Estimate for both revenues of $603 million and earnings of $1.04 per share lies within the respective guidance ranges.
Among the recent developments, we are encouraged to note that, on Jun 17, 2015, Edwards won the FDA go-ahead for the commercial availability of its latest generation non-surgical heart valve, Sapien 3, in the U.S. market. Management expects this earlier-than-expected U.S. launch to contribute approximately $10 million in incremental sales in the first couple of months.
In our opinion, several recent multiple study results on Sapien 3 validate Edwards’ superiority in the THV market, particularly in reducing mortality and PVLs, and the still untapped opportunity it holds in the space.
On an encouraging note, management currently expects the company’s competitive activity in the THV market to increase consistently over time. Buoyed by a strong start in 2015, Edwards now expects its underlying sales growth for the full year to lie at the high end of its previously guided range of 15-25%.
On the flip side, management anticipates that a stronger U.S. dollar will have a major impact on Edwards’ top-line results in 2015, much worse than what the company had forecasted earlier. Based on the current exchange rates, management now expects sales in 2015 to be reduced by $190 million compared to prior-year rates. This impact, we expect, will be reflected in the company’s second quarter results.
However, the resulting impact of the adverse currency fluctuations on Edwards’ 2015 earnings is expected to be mitigated by the company’s foreign exchange hedge contracts.
Moreover, management expects to witness an escalation in its second quarter selling, general and administrative (SG&A) and research and development (R&D) expenses, as some of the expenses anticipated in the first quarter were delayed. These are espected to hike its operating expense in the second quarter.
Earnings Whispers
Our proven model does not conclusively show that Edwards Lifesciences is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Edwards has a negative earnings ESP of -7.69%.That is because the Most Accurate estimate is pegged at 96 cents while the Zacks Consensus Estimate is pegged higher at $1.04.
Zacks Rank: Edwards has a Zacks Rank #3 which increases the predictive power of ESP. However, we need to have a positive ESP to be able to confidently predict an earnings beat.
Note that, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some companies you may want to consider instead as our model shows they have the right combination of elements to post an earnings beat this quarter:
Amedisys Inc. AMED, earnings ESP of +8.82% and a Zacks Rank #1.
DENTSPLY International Inc. XRAY, earnings ESP of +1.47% and a Zacks Rank #2.
ZELTIQ Aesthetics, Inc. ZLTQ, earnings ESP of +157.14% and a Zacks Rank #2.
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EDWARDS LIFESCI (EW): Free Stock Analysis Report
AMEDISYS INC (AMED): Free Stock Analysis Report
DENTSPLY INTL (XRAY): Free Stock Analysis Report
ZELTIQ AESTHETC (ZLTQ): Free Stock Analysis Report
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