Yahoo Finance Here's Why You Should Retain Edwards Lifesciences (EW) Now
Edwards Lifesciences Corporation EW is gaining from strength in the Transcatheter Aortic Valve Replacement (TAVR) arm. Robust sales of the HemoSphere monitoring platform instill optimism. The growing body of clinical evidence backing RESILIA tissue valves is poised to boost the company’s Surgical Structural Heart business. However, mounting operating costs and stiff rivalry raise apprehension.
In the past year, this Zacks Rank #3 (Hold) stock has lost 9.2% compared with a 25.8% fall of the industry it belongs to and a 12.4% decline of the S&P 500 composite.
The renowned global medical device company has a market capitalization of $60.91 billion. Its earnings surpassed estimates in three of the trailing four quarters and missed one, with the average surprise being 3.61%.
The company’s long-term expected growth rate of 13.9% compares with the industry’s growth projection of 15.9% and the S&P 500’s estimated 11.3% increase.
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Let’s delve deeper.
Key Drivers
Critical Care Business Holds Potential: The Critical Care segment registered strong growth compared to the year-ago 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. Further, True Wave disposable pressure monitoring devices used in the ICU witnessed high demand due to the elevated hospitalizations and demand for products used in high-risk surgery also rose year over year.
The company expects full-year 2022 underlying sales growth in the mid-single-digit range on the back of strength in demand for products used in more intense surgeries.
TAVR Arm Grows: The TAVR segment performed well in the first quarter, registering 11% growth from the prior-year figure on a reported basis and 13.7% on an underlying basis. The growth was primarily driven by increased adoption of the company’s technologies, including the SAPIEN platform. Edwards Lifesciences also witnessed strong TAVR adoption in Japan. The company has been focused on expanding the availability of TAVR therapy throughout the country following reimbursement approval last year for treating patients at low surgical risk.
Surgical Structural Heart, a Promising Business: Edwards Lifesciences registered strong growth within the Surgical Structural Heart business during the first quarter. The company continued to witness the global adoption of Edwards RESILIA tissue valves, including the INSPIRIS RESILIA aortic valve, the KONECT RESILIA valves conduit and the MITRIS RESILIA mitral valve. The company is encouraged by the growing evidence that supports Edwards RESILIA tissue valves, including two studies being presented at the Society of Thoracic Surgeons Conference.
Management believes that the adoption of RESILIA tissue valves will be further bolstered by the four-year mitral data from the COMMENCE clinical trial and the growing body of RESILIA clinical evidence, demonstrating the excellent durability of this tissue technology, even in the high-pressure mitral position.
Downsides
Rising Costs: In the first quarter, Edwards Lifesciences’ research and development expenditures were up 10.4%, while selling, general and administrative expenses rose 11.9% on a year-over-year basis, respectively. The rise in operating costs is exerting pressure on the company’s bottom line.
Foreign Woes: Unfavorable foreign currency impact has been adversely affecting Edward Lifesciences’ gross margin over the past few quarters. Per management, significant currency fluctuations could have a material effect on revenues, cost of sales and operational results.
Competitive Landscape: The medical devices industry is highly competitive with the presence of several competent players. In Heart Valve Therapy, Edwards Lifesciences faces significant rivalry from notable MedTech biggies. Management also anticipates consistent competition to impact its performance in the TAVR market.
Estimate Trend
In the past 60 days, the Zacks Consensus Estimate for Edwards Lifesciences’ earnings for 2022 has moved up by a penny to $2.57.
The Zacks Consensus Estimate for 2022 revenues is pegged at $5.72 billion, suggesting a 9.3% rise from the 2021 reported number.
Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. AMN, Novo Nordisk NVO and Merck & Co., Inc. MRK.
AMN Healthcare has a long-term earnings growth rate of 1.1%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.6%, 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 13.4% against the industry’s 46% fall.
Novo Nordisk has a long-term earnings growth rate of 14.5%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 7.6%, on average. It currently flaunts a Zacks Rank #2.
Novo Nordisk has outperformed its industry in the past year. NVO has gained 29% against the industry’s 15.9% growth.
Merck has a long-term earnings growth rate of 10.1%. The company surpassed earnings estimates in the trailing three quarters and missed in one, delivering a surprise of 13.4%, on average. It currently carries a Zacks Rank #2.
Merck has outperformed its industry in the past year. MRK has gained 17.9% against the industry’s 15.9% growth.
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