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Edwards Lifesciences (EW) Down 4.8% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Edwards Lifesciences (EW - Free Report) . Shares have lost about 4.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Edwards Lifesciences due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Edwards Lifesciences Beats on Q1 Earnings, Margins Down

Edwards Lifesciences first-quarter 2021 adjusted earnings per share of 54 cents surpassed the Zacks Consensus Estimate by 14.9% and improved 8% year over year.

GAAP earnings per share was also 54 cents in the quarter compared with the year-ago earnings per share of 49 cents, reflecting a 10.2% improvement.

Sales Details

First-quarter net sales were $1.22 billion, up 7.8% year over year on a reported basis. On an underlying basis, the growth was 5%. Moreover, the metric surpassed the Zacks Consensus Estimate by 4.9%.

Revenues were primarily driven by improvements in structural heart procedures volumes through the winter months and a gradual business recovery.

Segmental Details

In the first quarter, global sales in the TAVR product group amounted to $791.7 million, up 6.7% from the prior-year figure on a reported basis. On an underlying basis, the growth was 4.1%. Average selling prices were stable worldwide. In the United States, total TAVR sales were flat year over year. Outside the United States, total TAVR sales increased in the low-double digits on a year-over-year basis.

TMTT sales totaled $16.3 million, up 56.7% from the prior-year figure on a reported basis. On an underlying basis, the improvement was 46.1%. The company continued to register strong momentum on increased adoption of the PASCAL system and activation of more centers across Europe.

Surgical Structural Heart’s sales in the quarter totaled $213 million, up 10.1% from the year-ago quarter on a reported basis and 6.7% on an underlying basis. Robust adoption of the INSPIRIS RESILIA aortic surgical valve and the KONECT RESILIA aortic tissue valve conduit boosted the top line. Improvement across all regions during the quarter also drove revenues.

Critical Care sales totaled $195.6 million in the first quarter, up 7.1% from the year-ago quarter on a reported basis and 4.4% on an underlying basis. The revenue uptick resulted from the increased sales of technologies for operating rooms and intensive care unit. Also, increase in orders for the HemoSphere advanced monitoring platform on the back of an improvement in hospital capital spending contributed to the top line. Strong demand for the company’s products used in high-risk surgeries and recovery in the ClearSight non-invasive finger cuff in elective procedures also drove revenues.

Margins

In the first quarter, gross profit was $923.2 million, up 6.9%. Gross margin contracted 63 basis points (bps) to 75.9%.

The company-provided adjusted gross margin was 76%, reflecting a year-over-year contraction of 70 bps. This resulted from the negative impact of foreign exchange and incremental costs associated with responding to COVID-19, partially offset by improved manufacturing efficiencies.

Selling, general and administrative expenses rose 7.5% year over year to $330.8 million, primarily due to strengthening of foreign currencies (especially the Euro) and personnel-related costs. This was partially offset by pandemic-led reduced travel spending.

Research and development expenditures were $207 million, up 10.5% year over year. This primarily resulted from continued investments in the company's transcatheter innovations. These developments drove operating costs up by 8.6% to $537.8 million.

During the reported quarter, operating income was up 4.6% year over year to $385.4 million. However, operating margin contracted 96 bps to 31.7%.

Cash Position

Edwards Lifesciences exited the first quarter of 2021 with cash and cash equivalents and short-term investments of $1.33 billion compared with $1.40 billion recorded at the end of 2020. Long-term debt was $595.2 million at the end of the first quarter of 2021, up from $595 million at the end of 2020.

Net cash provided by operating activities at the end of the first quarter of 2021 was $301 million compared with $207 million a year ago. Capital expenditure rose to $106 million from $82 million a year ago.

2021 Guidance

For the second quarter of 2021, Edwards Lifesciences expects adjusted earnings per share in the range of 54-60 cents. The Zacks Consensus Estimate for the same is currently pegged at 51 cents.

The company projects second-quarter 2021 sales revenues to be in the range of $1.25-$1.33 billion. The Zacks Consensus Estimate for the same is currently pegged at $1.25 billion, which matches the lower end of the company-provided guidance.

For 2021, the company raised its projection of adjusted earnings per share to the range of $2.07-$2.27 from the earlier provided range of $2-$2.20. The Zacks Consensus Estimate for the same is currently pegged at $2.13.

However, for the year, the company reiterated its anticipation of sales to be in the range of $4.9-$5.3 billion. The Zacks Consensus Estimate for the same is currently pegged at $5.09 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 6.89% due to these changes.

VGM Scores

At this time, Edwards Lifesciences has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Edwards Lifesciences has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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