Here's Why You Should Retain Edward Lifesciences (EW) Stock Now
Edwards Lifesciences Corporation EW is likely to grow in the coming quarters, backed by the strong prospects of the Critical Care business, one of the rapidly growing businesses of the company. The RESILIA portfolio continues to gain significant traction with widespread adoption. Within TMTT (Transcatheter Mitral and Tricuspid Therapies), new therapy introductions, clinical trial achievements and geographic expansion look promising for the company.
Meanwhile, elevated expenses and foreign exchange headwinds remain a concern for EW’s business.
In the past year, this Zacks Rank #3 (Hold) stock has decreased 1.8% against the 1.6% rise of the industry and 24.5% growth of the S&P 500 composite.
The renowned global medical device company has a market capitalization of $46.3 billion. Edward Lifesciences’ earnings surpassed estimates in three of the trailing four quarters and broke even in one, delivering an average surprise of 2.03%.
Let’s delve deeper.
Upsides
Critical Care Business Holds Potential: Edwards’ complete hemodynamic portfolio within Critical Care includes the minimally-invasive FloTrac and Acumen IQ sensors, the noninvasive ClearSight and Acumen IQ cuffs and the ForeSight noninvasive tissue oximetry sensor. The state-of-the-art HemoSphere monitoring platform is also compatible with the company’s portfolio of sensors and catheters. EW is developing a decision support software suite with advanced algorithms for proactive hemodynamic management, including a semi-closed loop system for standardized management of patient fluid levels.
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Currently, the company is driving the adoption of its Smart Recovery Technologies and the Acumen IQ sensor. With a healthy pipeline of critical care innovations, Edwards is shifting its focus to smart recovery technologies, which are designed to help clinicians make better decisions and get patients home to their families faster.
TAVR Exhibits Promising Prospects: Across the product group, Edwards Lifesciences’ sales growth continues to be driven by its leading SAPIEN platform. Over the past few quarters, it has been observed that TAVR sales have been driven by the strong performance of the Edwards SAPIEN 3 Ultra valve in the United States, Europe and the Rest of the World, the Edwards SAPIEN 3 Ultra RESILIA valve in the United States and the Edwards SAPIEN 3 in Japan.
In the last reported third quarter, TAVR sales in the United States were particularly aided by the continued SAPIEN 3Ultra RESILIA launch. In Europe, the company’s sales growth continues to be broad-based by country, led by the demand for the SAPIEN platform.
In Japan, business operations reflected a gradual recovery in market growth as well as the strong adoption of SAPIEN 3 Ultra RESILIA. Edwards' TAVR procedures grew faster than the overall procedure growth as expected, and worldwide, the company pursues improving the diagnosis and treatment of more patients who remain undertreated.
TMTT Portfolio Showcases Robust Potential: To transform care and unlock the significant long-term growth opportunity for mitral and tricuspid patients, Edwards Lifesciences focuses on three key value drivers — a portfolio of differentiated therapies for complex mitral and tricuspid anatomies, positive clinical trial results to support approvals and adoption and favorable real-world clinical outcomes.
In the third quarter, sales of TMTT products were driven by the accelerated adoption of the differentiated PASCAL precision platform, the activation of more centers across the United States and Europe and key TEER (Transcatheter edge-to-edge repair) pulmonary hypertension (ph) procedural growth.
In addition, Edwards achieved several important milestones, which outlined its commitment to the unmet needs of mitral and tricuspid patients. Overall, Edwards’ vision to establish a portfolio of TMTT therapies is ramping up, with an expected deliverance of $180-$200 million from sales of products for the full year.
Downsides
Macro Concerns Put Pressure on the Bottom Line: Edwards Lifesciences has been grappling with escalated expenses for a while. In the third quarter of 2023, the company’s SG&A expenses rose 16.5%, driven by performance-based compensation and investments in transcatheter field-based personnel in support of EW’s growth strategy. R&D expenses in the quarter also increased, led by continued investments in transcatheter valve innovations, including increased clinical trial activity.
Foreign Exchange Headwinds: Foreign exchange is a major headwind for Edwards Lifesciences due to a considerable percentage of its revenues coming from outside the United States. We remain worried about the significant challenges Edward Lifesciences had to face due to the unfavorable foreign currency impact that has been adversely affecting the company’s gross margin over the past few quarters.
In the third quarter of 2023, foreign exchange rates decreased reported sales growth by 140 basis points or $16 million compared to the prior year. The company also posted a lower year-over-year adjusted gross profit margin of 76.3% due to the negative impact of foreign exchange. Given the present rates, management expects an approximately $40 million negative year-over-year impact on the full-year sales compared to 2022.
Estimate Trend
The Zacks Consensus Estimate for Edwards Lifesciences’ 2023 earnings per share (EPS) has remained constant at $2.51 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $5.97 billion. This suggests a 10.9% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Haemonetics (HAE), DaVita (DVA) and HealthEquity (HQY).
Haemonetics has an estimated earnings growth rate of 28.4% for fiscal 2024 compared with the industry’s 15.3%. HAE’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 16.1%. Its shares have increased 10.7% compared with the industry’s 1.9% rise in the past year.
HAE carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DaVita, sporting a Zacks Rank #1 at present, has a long-term estimated earnings growth rate of 17.3% compared with the industry’s 11.3%. Shares of the company have increased 38.4% compared with the industry’s 9% rise over the past year.
DVA’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 36.6%. In the last reported quarter, it delivered an average earnings surprise of 48.4%.
HealthEquity, carrying a Zacks Rank #2 at present, has an estimated long-term earnings growth rate of 27.5% compared with the industry’s 13.9%. Shares of HQY have increased 9.6% against the industry’s 2.8% decline over the past year.
HQY’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 16.5%. In the last reported quarter, it delivered an average earnings surprise of 22.5%.
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