Here's Why You Should Hold on to Edwards Lifesciences (EW) Now
Edwards Lifesciences Corporation EW has been gaining from huge potential in the Structural Heart business. The company ended the first quarter of 2022 with better-than-expected results. Strong sales of the HemoSphere monitoring platform buoy optimism. Further, the growing uptake of products used in intense surgeries appears promising. Yet, escalating expenses and foreign exchange headwinds raise apprehension.
Over the past year, this Zacks Rank #3 (Hold) stock has gained 10.8% over the past year, ahead of the 15.5% fall of the industry it belongs to and the 1.1% decline of the S&P 500 composite.
The renowned global medical device company has a market capitalization of $65.18 billion. Its first-quarter 2022 earnings surpassed the Zacks Consensus Estimate by 3.5%.
The company’s long-term expected growth rate of 12.9% compares with the industry’s growth projection of 15.6% and the S&P 500’s estimated 10.7% increase.
Image Source: Zacks Investment Research
Let’s delve deeper.
Key Drivers
Q1 Upsides: Edwards Lifesciences exited the first quarter with earnings and revenues beating the Zacks Consensus Estimate. The company registered year-over-year growth in revenues driven by strong sales growth across all four product groups. Continued strong adoption of the PASCAL system across Europe seems encouraging.
The company has reaffirmed its full-year 2022 outlook, which is indicative of the continuation of this bullish trend. Strong growth prospects in emerging economies along with strong solvency and capital structure are added benefits.
Critical Care Business Grows: The Critical Care arm recorded robust revenue growth in the first quarter, both on a reported and an underlying basis. The revenue uptick resulted from balanced contributions from all product lines, led by strong sales of the HemoSphere monitoring platform.
The True Wave disposable pressure monitoring devices used in the ICU saw robust demand due to elevated hospitalizations as well as high demand for products used in high-risk surgery. The company also witnessed an increased uptake of the ClearSight non-invasive finger cup used in elective procedures during the quarter under review.
Surgical Structural Heart, a Promising Business: Robust revenue growth within the Surgical Structural Heart business was driven by market adoption of the newest premium technologies. The company continued to witness the global adoption of Edwards RESILIA tissue valves in the first quarter. In March 2022, the company gained FDA approval and announced the commercial launch of the MITRIS RESILIA valve, raising optimism.
Management believes that the adoption of RESILIA tissue valves will be further bolstered by the four-year mitral data from the COMMENCE clinical trial as well as the growing body of RESILIA clinical evidence.
Downsides
Escalating Costs: During the first quarter, Edwards Lifesciences’ research and development expenditures were up 10.4% year over year, whereas selling, general and administrative expenses rose 11.9% year over year. These mounting operating expenses drove operating costs by 11.4%, building significant pressure on the company’s bottom line.
Forex Woes: Unfavorable foreign currency movements have been affecting Edward Lifesciences’ gross margin for the past few quarters. Per management, significant currency fluctuations could have a material effect on revenues, cost of sales and operational results.
Reimbursement Cut to Increase Expenses: The U.S. government's law related to the health care system includes provisions that, among other things, reduce or limit Medicare reimbursement, require all individuals to have health insurance (with limited exceptions) and impose increased taxes. This, in turn, puts pressure on the cost structure of companies like Edwards Lifesciences in the medical sector.
Estimate Trend
Over the past 30 days, the Zacks Consensus Estimate for Edwards Lifesciences’ earnings for 2022 has moved 0.4% north to $2.57.
The Zacks Consensus Estimate for 2022 revenues is pegged at $5.73 billion, suggesting a 9.4% rise from the 2021 reported number.
Key Picks
A few better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. AMN, Molina Healthcare, Inc. MOH and Medpace Holdings, Inc. MEDP.
AMN Healthcare has a long-term earnings growth rate of 16.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 20%, on average. It currently flaunts a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 12.6% versus the 61.9% industry decline.
Molina Healthcare has an estimated long-term growth rate of 16.4%. Molina Healthcare’s earnings surpassed estimates in the trailing three quarters and missed in one, the average surprise being 1.5%. It currently sports a Zacks Rank #2.
Molina Healthcare has underperformed the industry over the past year. MOH has gained 15.8% compared with 20.4% industry growth in the said period.
Medpace has a historical growth rate of 27.3%. Medpace’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%. It currently has a Zacks Rank #2.
Medpace has outperformed its industry in the past year. MEDP has declined 16.9% compared with the industry’s 61.9% fall.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Edwards Lifesciences Corporation (EW) : Free Stock Analysis Report
Molina Healthcare, Inc (MOH) : Free Stock Analysis Report
AMN Healthcare Services Inc (AMN) : Free Stock Analysis Report
Medpace Holdings, Inc. (MEDP) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
