Edwards Lifesciences EW) has been progressing well with core segmental growth and acquisitions. However, a tough competitive landscape and adverse foreign exchange translation are concerning.
In the past one year, the company’s shares have outperformed the industry. The stock has rallied 41.8% compared with the industry’s15% gain.
This $49.77-billion leader of cardiovascular treatment’s earnings are expected to grow 14.8% in the next five years. Also, the company has a trailing-four quarter positive earnings surprise of 6.7%, on average.
Let’s delve deeper into the factors that substantiate the company’s Zacks Rank #3 (Hold).
CASMED Performance Impressive: The acquisition of CAS Medical Systems contributed impressively to critical care arm revenues during the third quarter of 2019. CASMED’s FORE-SIGHT non-invasive cerebral oxygenation technology (which was integrated with Edwards Lifesciences’ HemoSphere advanced hemodynamic monitoring platform) recently received FDA approval. This is expected to strengthen Edwards Lifesciences’ presence in the smart monitoring technology market.
Surgical Heart Valve Therapy Growth Continues: Lately, Edwards Lifesciences has been registering strong top-line growth within its Surgical Structural Heart business buoyed by increased adoption of premium high-value technologies and international strength. During the third quarter, the INSPIRIS RESILIA aortic valve continued to grow across all regions, with notable usage in more active patients. The takeover of Harpoon Medical resulted in the integration of its flagship beating-heart repair procedure for mitral valve patients (HARPOON system) into Edward Lifesciences’ Surgical Heart Valve Therapy portfolio.
TAVR on Growth Track: In the third quarter, transcatheter aortic valve replacement (TAVR) sales registered strong year-over-year uptick. The impressive performance of the TAVR segment was led by favorable results from the PARTNER 3 trials, which led to the recent FDA clearance for the expansion of SAPIEN 3 and SAPIEN 3 Ultra systems. Globally, TAVR procedures have grown in the high-teens, reinforcing the company’s projection of a $7-billion opportunity by 2024.
However, there are a few factors marring growth.
Foreign Exchange: We are worried about foreign currency impact on the company’s gross margin over the past few quarters. Per management, significant currency fluctuations might have a material effect on revenues, cost of sales and operational results.
Competitive Landscape: Edwards Lifesciences faces tough competition from key market rivals like Medtronic, Sorin Group, ICU Medical, Pulsion Medical Systems AG, LiDCO Group and Becton, Dickinson. Particularly, Medtronic and Boston Scientific pose tough competition to Edwards Lifesciences in the TAVR market.
Which Way Are Estimates Treading?
For the fourth quarter of 2019, the Zacks Consensus Estimate for earnings is pegged at $1.48, which indicates a 26.5% rise from the year-ago quarter’s figure. The same for revenues is pegged at $1.15 billion, calling for year-over-year growth of 17.8% from the prior-year quarter’s number.
The Zacks Consensus Estimate for 2019 earnings is pegged at $5.60, suggesting 19.2% year-over-year growth from the year-ago figure. The same for revenues is pegged at $4.33 billion.
Stocks Worth a Look
A few better-ranked stocks from the broader medical space are Haemonetics Corporation HAE, Hill-Rom Holdings, Inc HRC and Omnicell OMCL.
Haemonetics has a Zacks Rank #1 (Strong Buy) and a projected long-term earnings growth rate of 13.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hill-Rom’s long-term earnings growth rate is estimated at 11.7%. The company currently carries a Zacks Rank #2 (Buy).
Omnicell has a long-term earnings growth rate of 12.5%. The company also currently carries Zacks Rank #2.
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