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Why Is Edwards Lifesciences (EW) Down 12.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for Edwards Lifesciences (EW - Free Report) . Shares have lost about 12.5% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Edwards Lifesciences Q4 Earnings Lag, Sales Top Estimates

Edwards Lifesciences Corporation’s fourth-quarter 2019 adjusted earnings per share  were $1.46, missing the Zacks Consensus Estimate by 1.4%. Moreover, the figure improved 24.8% year over year.

The company’s earnings per share (on a reported basis) was $1.32 in the quarter, marking a massive surge from the year-ago figure of 3 cents.

For 2019, adjusted earnings was $5.57, up 18.5% from the year-ago number. The figure missed the Zacks Consensus Estimate by 0.5%.

Sales Details

Fourth-quarter net sales improved 20% year over year to $1.17 billion and surpassed the Zacks Consensus Estimate by 1.7%. Additionally, underlying sales increased 19%.

Revenues were primarily driven by significant growth in Transcatheter Aortic Valve Replacement (TAVR) sales and strong performance of the Critical Care product line.

For the year, net sales were $4.35 billion, up 16.9% from the year-ago figure. The figure beat the Zacks Consensus Estimate by 0.5%.

Segmental Details

In the fourth quarter, sales in the TAVR product group amounted to $763 million, up 30% from the prior-year figure, both on reported and underlying basis.

In the United States, total TAVR procedures rose around 40% year over year. Outside the United States, total TAVR procedures grew in the high-teens on a year-over-year basis.

Surgical Structural Heart’s sales in the quarter totaled $205 million, down 1% from the year-ago quarter on a reported basis and down 3% on an underlying basis. Per management, the downside resulted from lower surgical aortic valve procedures in the United States as TAVR adoption increased.

Critical Care sales totaled $199 million in the fourth quarter, up 12% from the year-ago quarter on a reported basis and up 8% on an underlying basis.The upside was driven by robust demand for the HemoSphere advance monitoring platform and continued adoption of Smart Recovery.

Transcatheter Mitral and Tricuspid Therapies (TMTT) sales totaled $7 million, adversely impacted by the voluntary PASCAL system field corrective action completed in the fourth quarter.

Margins

In the fourth quarter, gross margin contracted 37 bps to 75.6%. Favorable impacts from foreign exchange rates and product mix were offset by spending in support of the new European device regulations and manufacturing variances.

SG&A expenses rose 20.5% year over year to $347 million, driven by increased field clinical personnel to support TAVR cases in the United States and TMTT cases in Europe.

R&D expenditures escalated 18.9% year over year to $194 million due to significant investments in transcatheter structural heart programs. Adjusted operating margin in the quarter contracted 31 bps to 29.5 %.

Cash Position

Edwards Lifesciences exited 2019 with cash and cash equivalents, and short-term investments of $1.5 billion compared with $0.86 billion at the end of 2018. Long-term debt at the end of 2019 was $594.4 million compared with $593.8 million at the end of 2018.

At the end of 2019, net cash provided from operating activities was $1.18 billion compared with $0.93 billion a year ago. Capital expenditure rose to $254.4 million from $238.7 million a year ago.

Guidance Impressive

For 2020, Edwards Lifesciences updated its 2020 guidance. The company now projects 2020 adjusted  earnings of $6.15-$6.40, higher than $6.05-$6.30 mentioned earlier. The Zacks Consensus Estimate is pegged at $6.14, indicating a decline from the company’s guided range.

Edwards Lifesciences projects 2020 total revenues of $4.6-$5.0 billion compared with $4.5-$5.0 billion mentioned earlier. The Zacks Consensus Estimate of $4.80 billion falls within the company’s guidance.

For first-quarter 2020, the company forecasts total sales between $1.15 billion and $1.2 billion. The Zacks Consensus Estimate for the same stands at $1.14 billion, which lies below Edwards Lifesciences’ envisioned range. Adjusted earnings is anticipated between $1.49 and $1.59. The Zacks Consensus Estimate for the same is pegged at $1.47, below the company’s guided range.

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months.

VGM Scores

At this time, Edwards Lifesciences has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

Outlook

Edwards Lifesciences has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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