Edwards Lifesciences (EW) Up 2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Edwards Lifesciences (EW). Shares have added about 2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Edwards Lifesciences due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Edwards Lifesciences Q4 Earnings Match, Margins Contract
Edwards Lifesciences Corporation reported adjusted earnings per share of 64 cents in fourth-quarter 2023, in line with the Zacks Consensus Estimate. The figure is also in line with the year-ago quarter’s level.
The quarter’s one-time adjustments primarily include the spin-off of Critical care and the prior period’s ongoing tax. GAAP earnings per share were 61 cents in the quarter, down 6.2% year over year.
For the full year, adjusted earnings were $2.30 per share, down 5.7% from the year-ago period’s levels. It also missed the Zacks Consensus Estimate by 8.4%.
Sales Details
Fourth-quarter net sales were $1.53 billion, up 13.8% year over year on a reported basis (up 13% at constant exchange rate or CER). The metric surpassed the Zacks Consensus Estimate by 2.3%.
Total revenues for 2023 were $6.00 billion, up 11.6% from the year-ago period’s figure. The figure beat the Zacks Consensus Estimate by 0.5%.
Segmental Details
In the fourth quarter, global sales in the Transcatheter Aortic Valve Replacement (TAVR) product group amounted to $979 million, up 13% year over year or 12% at CER. The upside was driven by double-digit constant currency growth in the United States, Europe and Japan. The company’s competitive position was stable globally and local selling prices were also steady. In the United States, the company is witnessing the continued expansion and adoption of the SAPIEN 3 Ultra RESILIA platform. Management is confident that the future of TAVR remains strong, driven by an increased focus on patient activation, a platform that delivers lifetime management for aortic stenosis patients, advances in new technologies such as RESILIA tissue and indication expansion and increased global adoption.
Transcatheter Mitral and Tricuspid Therapies (TMTT) sales totaled $56 million, up 65% from the prior-year quarter’s figure on a reported basis. This performance was driven by the accelerating adoption of the company’s differentiated PASCAL precision platform, the activation of more centers across the United States and Europe and the overall growth of transcatheter edge-to-edge repair therapy.
Surgical Structural Heart sales in the fourth quarter totaled $248 million, up 11% from the year-ago quarter’s levels on a reported basis and 10% at CER. Growth was driven by the adoption of Edwards' premium products, RESILIA products and overall procedure growth.
Critical Care sales totaled $250 million in the fourth quarter, up 11% from the year-ago quarter’s levels on both reported basis and CER. Sales growth was driven by contributions from all product lines and major regions, led by the HemoSphere platform and Smart Recovery technology with strong adoption of Acumen IQ sensors equipped with the Hypotension Prediction Index algorithm.
Margins
In the fourth quarter, gross profit was $1.18 billion, up 7.9%. However, the gross margin contracted 413 basis points (bps) to 76.7%.
The company-provided adjusted gross margin was 76.8%, marking a 320 basis-point (bps) contraction year over year. This year-over-year reduction was due to the unfavorable impact of foreign exchange.
Selling, general and administrative expenses rose 16.8% year over year to $480 million. Research and development expenditures were $270 million, up 16.3% year over year.
During the reported quarter, operating income declined 4.5% year over year to $427.2 million. The operating margin contracted 532 bps to 27.8%.
Cash Position
Edwards Lifesciences exited 2023 with cash and cash equivalents and short-term investments of $1.64 billion compared with $1.22 billion recorded at the end of 2022.
Long-term debt was $597 million at the end of 2023, slightly up from $596.3 million at the end of 2022.
Guidance
The company updated its guidance for full-year 2024.
Edwards Lifesciences now expects full-year 2024 adjusted earnings per share to be in the range of $2.70-$2.80. The Zacks Consensus Estimate for the metric is pegged at $2.74.
The company now projects total sales for 2024 in the range of $6.30-$6.60 billion, suggesting growth of 8-10%. The Zacks Consensus Estimate for 2024 revenues is pegged at 6.48 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Edwards Lifesciences has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Edwards Lifesciences has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Edwards Lifesciences belongs to the Zacks Medical - Instruments industry. Another stock from the same industry, Thermo Fisher Scientific (TMO), has gained 7.1% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Thermo Fisher reported revenues of $10.89 billion in the last reported quarter, representing a year-over-year change of -4.9%. EPS of $5.67 for the same period compares with $5.40 a year ago.
For the current quarter, Thermo Fisher is expected to post earnings of $4.71 per share, indicating a change of -6.4% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.6% over the last 30 days.
Thermo Fisher has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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