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What's in Store for Edwards Lifesciences in (EW) Q4 Earnings?

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Zacks Equity Research
·7 min read
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Edwards Lifesciences Corporation EW is slated to report fourth-quarter and full-year 2020 results on Jan 27, after market close.

In the last-reported quarter, the company posted an earnings surprise of 13.33%.

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

Factors at Play

Critical Care

The fourth-quarter results are expected to reflect a mixed performance by the core Critical Care product group. The pandemic has continued to impact the procedural volumes in the segment, as elective procedures have been deferred. Global demand has been soft due to the pandemic-led business disruptions over the past few months.

However, management is optimistic about the robust customer adoption of the TruWave disposable pressure monitoring devices despite the challenging pandemic-led market conditions. Also, demand for products used in cardiac surgeries is expected to continue its momentum as the hospitals are gradually resuming the treatment of non-COVID individuals. These are likely to be reflected in the fourth-quarter results.

However, an expected decline in HemoSphere orders from hospitals in the United States due to the pandemic-led continued limit on capital spending is likely to have weighed on the top line.

The adverse impact from reduced orders is likely to result in depressed segmental sales, which is expected to be within the original guidance range of minus 5% to plus 5%, as provided by the company.

Meanwhile, the Zacks Consensus Estimate for the segment’s fourth-quarter revenues is pegged at $188 million, suggesting a decrease of 5.5% from the year-ago quarter’s reported number.

Surgical Structural Heart

Within the Surgical Structural Heart Group, the company is expected to witness business recovery during the fourth quarter after being adversely impacted by the pandemic-led disruptions. Over the past few months, the company has been witnessing improvement in surgical case volumes on the back of patients willing to seek heart valve surgery and the hospitals being able to manage surgical patient flow. Further, the company’s sales volumes are likely to witness a rebound due to ongoing prioritization of heart surgery in many hospitals, leading to improvement in case volumes.

Further, Edwards Lifesciences is optimistic about the robust adoption of its premium RESILIA tissue valves, including the INSPIRIS aortic surgical valve and the KONECT aortic valve conduit in the United States. In Europe, the HARPOON mitral valve repair system, which gained momentum in the last-reported quarter, is expected to have continued the same in the fourth quarter as well. The INSPIRIS valve utilization, which was robust in the earlier quarter across the globe, is likely to have continued with this strong momentum in the fourth quarter, banking on increased demand by patients.

However, the company anticipates that localized COVID-19 hotspots may have continued to impact procedure growth during the fourth quarter.

Edwards Lifesciences projects a sales decline of 5-15% for 2020 in the segment due to pandemic-led business disruptions.

The Zacks Consensus Estimate for the segment’s fourth-quarter revenues is pegged at $209 million, implying an uptick of 1.9% 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 continued to record increased global sales in the fourth quarter banking on robust adoption of the SAPIEN valve platform along with a rebound in procedure volumes. The momentum of the SAPIEN 3 Ultra platform is likely to have continued during the fourth quarter as well, primarily due to strong customer adoptions. Further, the company’s top line is expected to have benefited from the favorable clinician feedback on improved paravalvular leak performance of the SAPIEN 3 Ultra.

Outside the United States, the strong adoption of TAVR is likely to have contributed to the top line in the fourth quarter despite pandemic-related challenges. Notably, the SAPIEN 3 transcatheter heart valve was approved in China in June, which is likely to have witnessed strong customer adoption.

However, despite strength in the TAVR business, the company is likely to have been affected by regional variability in sales due to the ongoing pandemic-led challenging market conditions.

Edwards Lifesciences Corporation Price and EPS Surprise

Edwards Lifesciences Corporation Price and EPS Surprise
Edwards Lifesciences Corporation Price and EPS Surprise

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

Edwards Lifesciences’ 2020 TAVR sales growth is projected to be at the high end of the previous range of minus 5% to plus 5%. The Zacks Consensus Estimate for the segment’s fourth-quarter revenues is pegged at $778 million, implying an uptick of 4.4% from the sequentially last quarter’s reported figure.

The company’s Transcatheter Mitral and Tricuspid Therapies segment’s PASCAL transcatheter valve repair system is likely to have continued its strong momentum in the fourth quarter of 2020. The company, during its third-quarter earnings call, had confirmed the receipt of the CE Mark for PASCAL ACE implant system for mitral and tricuspid repair, which has already been introduced in the market. Sales proceeds from the implant system are likely to have contributed to the fourth-quarter top line. Edwards Lifesciences is also likely to have continued with its progress of both transfemoral EVOQUE and SAPIEN M3 platforms during the to-be-reported quarter.

The company is also optimistic about the resumption of new center activations in Europe and increased commercial procedures despite the pandemic-led business challenges, which is expected to have boosted the top line. The company’s commercialization of PASCAL in Europe is likely to have continued during the fourth quarter as well, thus driving up revenues.

The Zacks Consensus Estimate for the segment’s fourth-quarter revenues is pegged at $12.2 million, implying an uptick of 69.2% from the year-earlier quarter’s reported figure.

The Estimate Picture

The Zacks Consensus Estimate for fourth-quarter 2020 revenues is pegged at $1.19 billion, suggesting an improvement of 0.9% from the year-ago quarter’s reported figure.

The Zacks Consensus Estimate for fourth-quarter 2020 earnings is pegged at 53 cents, indicating an uptick of 8.2% from the year-ago quarter’s reported figure. The same for the full year is pegged at $1.89, indicating an improvement of 1.6% year over year.

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 higher chances of beating estimates. However, this is not the case here as you can see:

Earnings ESP: Edwards Lifesciences has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).

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.

NextGen Healthcare, Inc. NXGN has an Earnings ESP of +4.66% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Patterson Companies, Inc. PDCO has an Earnings ESP of +1.96% and a Zacks Rank of 2, at present.

Omnicell, Inc. OMCL has an Earnings ESP of +8.86% and is a Zacks #1 Ranked stock.

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