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Edwards Lifesciences (EW) Beats on Q3 Earnings, Gross Margin Up

Edwards Lifesciences Corporation’s EW third-quarter 2021 adjusted earnings per share (EPS) of 54 cents surpassed the Zacks Consensus Estimate by 1.9% and improved 5.9% year over year.

GAAP EPS was 52 cents in the quarter compared with the year-ago EPS of $1.85, reflecting a 71.9% decline.

Sales Details

Third-quarter net sales were $1.31 billion, up 14.8% year over year on a reported basis. On an underlying basis, growth was 14%. However, the metric lagged the Zacks Consensus Estimate by 0.9%.

Segmental Details

In the third quarter, global sales in the Transcatheter Aortic Valve Replacement (TAVR) product group amounted to $857.8 million, up 15.2% from the prior-year figure on a reported basis. On an underlying basis, growth was 14.5%. Average selling prices were stable worldwide. In the United States, total TAVR sales grew 12% year over year. Outside the United States, total TAVR sales increased 20% on a year-over-year basis.

Transcatheter Mitral and Tricuspid Therapies sales totaled $22.3 million, up 83.6% from the prior-year figure on a reported basis. On an underlying basis, the improvement was 81.3%. The company continued to register strong momentum on increased adoption of the PASCAL platform in Europe.

Surgical Structural Heart’s sales in the quarter totaled $217.4 million, up 6.9% from the year-ago quarter on a reported basis and 5.9% on an underlying basis. Revenue growth was lifted by increased adoption of the premium RESILIA technologies worldwide, including INSPIRIS RESILIA aortic valve, the KONECT RESILIA valves conduit and the MITRIS RESILIA mitral valve.

Edwards Lifesciences Corporation Price, Consensus and EPS Surprise

Edwards Lifesciences Corporation Price, Consensus and EPS Surprise
Edwards Lifesciences Corporation Price, Consensus and EPS Surprise

Edwards Lifesciences Corporation price-consensus-eps-surprise-chart | Edwards Lifesciences Corporation Quote

Critical Care sales totaled $212.7 million in the third quarter, up 17.6% from the year-ago quarter on a reported basis and 17% on an underlying basis. The revenue uptick resulted from balanced contributions from all product lines, led by HemoSphere sales in the United States as hospital capital spending continues to rise. Strong demand for the company’s products used in high-risk surgeries and increased demand for the ClearSight non-invasive finger cuff in elective procedures also drove revenues.

Margins

In the third quarter, gross profit was $998.5 million, up 16.1%. Gross margin expanded 84 basis points (bps) to 76.2%.

The company-provided adjusted gross margin was 76.3%, reflecting a year-over-year expansion of 80 bps. This increase was driven by a more profitable product mix, partially offset by negative foreign exchange impact.

Selling, general and administrative expenses rose 18.6% year over year to $364.4 million, primarily driven by personnel-related costs and increased commercial activities compared to the COVID-impacted prior year.

Research and development expenditures were $238 million, up 21.7% year over year. This primarily resulted from continued investments in transcatheter innovations, including increased clinical trial activity. These developments drove operating costs by 19.8% to $602.4 million.

During the reported quarter, operating income rose 10.9% year over year to $396.1 million. Operating margin contracted 108 bps to 30.2%.

Cash Position

Edwards Lifesciences exited the third quarter of 2021 with cash and cash equivalents and short-term investments of $1.51 billion compared with $1.56 billion recorded at the end of the second quarter of 2021. Long-term debt was $595.5 million at the end of the third quarter of 2021, up from $595.4 million at the end of the last-reported quarter.

Cumulative net cash provided by operating activities at the end of the third quarter of 2021 was $532 million compared with $216 million a year ago. Capital expenditure for the same period was $61 million compared with $103 million a year ago.

Guidance

For the fourth quarter of 2021, Edwards Lifesciences expects adjusted EPS in the range of 53-59 cents. The Zacks Consensus Estimate for the same is currently pegged at 55 cents.

The company projects fourth-quarter 2021 sales revenues in the range of $1.30-$1.38 billion. The Zacks Consensus Estimate for the same is currently pegged at $1.41 billion.

For 2021, the company reinstated its previous projection of adjusted EPS at the high end of the $2.07-$2.27 range. The Zacks Consensus Estimate for the same is currently pegged at $2.26.

The company also reinstated its previous anticipation for sales at $5.2-$5.4 billion for 2021. The Zacks Consensus Estimate for the same is currently pegged at $5.32 billion.

Our Take

Edwards Lifesciences exited the third quarter of 2021 with better-than-expected earnings despite the pronounced impact of the Delta variant. Strong sales growth across all four product groups buoys optimism. We are upbeat about the strong adoption of the INSPIRIS aortic surgical valve and the KONECT aortic valve conduit. Continued strong adoption of the SAPIEN 3 Ultra platform and the PASCAL system across Europe looks encouraging as well. Strong demand for the company’s products used in high-risk surgeries and increased demand in the ClearSight non-invasive finger cuff in elective procedures are impressive. The company has reinstated its full-year 2021 outlook, which is indicative of the continuation of this bullish trend.

However, continued choppy market conditions due to the unrelenting spread of coronavirus are concerning. An increase in operating costs is worrying as well. Moreover, tough competitions in the cardiac devices market and reimbursement issues persist.

Zacks Rank and Stocks to Consider

Edwards Lifesciences currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader medical space that have announced quarterly results are Quest Diagnostics Incorporated DGX, Abbott Laboratories ABT, and HCA Healthcare, Inc. HCA.

Quest Diagnostics, carrying a Zacks Rank #2 (Buy), reported third-quarter 2021 adjusted EPS of $3.96, which beat the Zacks Consensus Estimate by 33.8%. Third-quarter revenues of $2.77 billion outpaced the consensus mark by 12.6%.

Abbott reported third-quarter 2021 adjusted EPS of $1.40, which surpassed the Zacks Consensus Estimate by 52.2%. Revenues of $10.93 billion outpaced the Zacks Consensus Estimate by 15.3%. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

HCA Healthcare, currently carrying a Zacks Rank #2, reported third-quarter 2021 adjusted EPS of $4.57, surpassing the Zacks Consensus Estimate by 11.5%. Revenues of $15.28 billion surpassed the Zacks Consensus Estimate by 4.7%.


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