Can TAVR's SAPIEN 3 Aid Edwards Lifesciences (EW) Q1 Earnings?

Edwards Lifesciences Corporation EW is slated to report first-quarter 2020 results on Apr 23, after market close. In the last reported quarter, the company’s earnings of $1.46 per share lagged the Zacks Consensus Estimate by 1.4%. The trailing four-quarter earnings beat is 6.3%, on average.

Let's see how things are shaping up prior to this announcement.

Key Catalysts

Through the first quarter, to control the coronavirus outbreak, quarantine restrictions were imposed on several nations worldwide, resulting in massive disruption in the global supply chain. Further, non-COVID-19 healthcare activities were postponed during this period to focus more on coronavirus-led damage control. Hence, Edwards Lifesciences, which has a strong base in the United States and Europe, is expected to have seen a notable reduction in product demand, followed by a fall in its overall quarterly revenues. However, the magnitude of this impact is still unclear to us.

Meanwhile, let us delve deeper into how core business segments have progressed otherwise during the first quarter.

Edwards Lifesciences Corporation Price and EPS Surprise

Edwards Lifesciences Corporation Price and EPS Surprise

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

Critical Care

The first-quarter results are expected to reflect strength in the core Critical Care product group. The segment has been showing solid growth across all product categories and geographies over the last few quarters.

Management is optimistic about the robust customer adoption of the HemoSphere all-in-one monitoring platform, particularly in the United States and Europe. This momentum is expected to have continued in the first quarter, following the global launch of the platform with the FloTrac sensor and the Acumen Hypotension Prediction Index software. This is likely to have contributed to the top line in the first quarter.

The FDA approved FORE-SIGHT, a cerebral oximetry technology (from the CASMED acquisition) on HemoSphere, which is also expected to have contributed to the company’s top line following the commercial launch in the last reported quarter. The integration of the full range of technologies with HemoSphere is supposed to have created a unique offering of enhanced recovery tools and predictive analytics capabilities in the field of smart monitoring. This, in turn, is expected to have contributed to the company’s first-quarter top line, strongly.

For 2020, the company expects underlying sales growth of 6-9% in Critical Care. However, this may change owing to the coronavirus-led market gloom.

Meanwhile, the Zacks Consensus Estimate for the segment’s first-quarter revenues is pegged at $193 million, calling for growth of 9.7% from the year-earlier quarter’s reported number.

Surgical Structural Heart

Within the Surgical Structural Heart Group, the company is expected to continue gaining traction from the strong adoption of its premium high-value technologies. Steady acceptance of the INSPIRIS RESILIA aortic valve across the globe is likely to reflect on first-quarter sales.

Edwards Lifesciences projects flat to 3% underlying sales growth for 2020 in this segment.

However, sales might have suffered due to lower surgical aortic valve procedures in the United States.

The Zacks Consensus Estimate for the segment’s first-quarter revenues is pegged at $202 million, implying a drop of 6% from the year-earlier quarter’s reported figure.

Other Factors at Play

Within the Transcatheter Aortic Valve Replacement (TAVR) arm, the company is expected to have witnessed strong first-quarter numbers on robust therapy adoption across all geographies with notable strength in the United States. The company’s TAVR revenues in the first quarter of 2020 are expected to have been boosted by the advancement in TAVR treatments following the FDA indication expansion for SAPIEN 3 and SAPIEN 3 Ultra systems. Further, the company’s top line is expected to have been benefited by the rollout of the SAPIEN 3 Ultra in the United States and Europe.

Outside the United States, the company’s SAPIEN 3 transcatheter heart valve is likely to have contributed positively to the top line in the first quarter, after receiving the CE Mark to expand the use of the same in the fourth quarter.

Previously, Edwards Lifesciences projected 2020 underlying sales growth to be 12-15% for this segment.

Q1 Estimates

Meanwhile, we note that, for the first quarter, the Zacks Consensus Estimate for earnings per share stands at $1.38, suggesting a rise of 4.6% from the year-ago quarter’s reported figure. The same for revenues is pinned at $1.07 billion, indicating 7.9% growth from the prior-year quarter’s reported number.

What Our Model Suggests

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, has good chances of beating estimates. However, this is not the case here as you can see:

Zacks Rank: The company currently carries a Zacks Rank #3.

Earnings ESP: Edwards Lifesciences has an Earnings ESP of -18.23%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Worth a Look

Here are a few medical stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle.

Chemed Corporation CHE currently sports a Zacks Rank of 1 and has an Earnings ESP of +1.78%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Aphria Inc. APHA, carrying a Zacks Rank of 2 at present, has an Earnings ESP of +35.71%.

DexCom, Inc. DXCM is a Zacks #2 Ranked stock with an Earnings ESP of +143.90%.

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