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Edwards Lifesciences (EW) Beats on Q2 Earnings, Margins Up

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Edwards Lifesciences Corporation’s (EW - Free Report) second-quarter 2021 adjusted earnings per share (EPS) of 64 cents surpassed the Zacks Consensus Estimate by 16.4% and improved 88.2% year over year.

GAAP EPS was 78 cents in the quarter compared with the year-ago EPS of 20 cents, reflecting a 290% surge.

Sales Details

Second-quarter net sales were $1.38 billion, up 48.8% year over year on a reported basis. On an underlying basis, growth was 44%. Moreover, the metric surpassed the Zacks Consensus Estimate by 7%.

Revenues were driven by strong sales growth across all four product groups, led by TAVR.

Segmental Details

In the second quarter, global sales in the Transcatheter Aortic Valve Replacement (TAVR) product group amounted to $901.5 million, up 51.7% from the prior-year figure on a reported basis. On an underlying basis, growth was 47.5%. Average selling prices were stable worldwide. In the United States, total TAVR sales grew 50% year over year. Outside the United States, total TAVR sales increased 40% on a year-over-year basis.

Transcatheter Mitral and Tricuspid Therapies sales totaled $22.1 million, up 259.3% from the prior-year figure on a reported basis. On an underlying basis, the improvement was 231.2%. The company continued to register strong momentum on increased adoption of the PASCAL system and activation of more centers across Europe.

Edwards Lifesciences Corporation Price, Consensus and EPS Surprise

 

Edwards Lifesciences Corporation Price, Consensus and EPS Surprise

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

Surgical Structural Heart’s sales in the quarter totaled $237.4 million, up 47.5% from the year-ago quarter on a reported basis and 42% on an underlying. Revenue growth was lifted by increased adoption of the premium RESILIA technologies around the world and rebounding surgical aortic treatment rates in the United States. The company witnessed steady improvement in surgical procedure volumes during the second quarter.

Critical Care sales totaled $215 million in the second quarter, up 31.3% from the year-ago quarter on a reported basis and 27.2% on an underlying basis. The revenue uptick resulted from balanced contributions from all product lines, led by HemoSphere sales in the United States as hospital capital spending continues to rise. 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 second quarter, gross profit was $1.04 billion, up 51.7%. Gross margin expanded 146 basis points (bps) to 75.7%.

The company-provided adjusted gross margin was 77.9%, reflecting a year-over-year expansion of 150 bps. This increase was driven by a more profitable product mix, partially offset by negative foreign exchange impact.

Selling, general and administrative expenses rose 36.2% year over year to $374.5 million, primarily due to strengthening of foreign currencies (especially the Euro), increased commercial activities and personnel-related costs.

Research and development expenditures were $225.3 million, up 23.7% year over year. This primarily resulted from continued investments in transcatheter innovations, including increased clinical trial activity. These developments drove operating costs up by 31.2% to $599.8 million.

During the reported quarter, operating income rose 92.3% year over year to $441.9 million. Operating margin expanded 727 bps to 32.1%.

Cash Position

Edwards Lifesciences exited the second quarter of 2021 with cash and cash equivalents and short-term investments of $1.56 billion compared with $1.33 billion recorded at the end of the first quarter of 2021. Long-term debt was $595.4 million at the end of the second quarter of 2021, up from $595.2 million at the end of the last-reported quarter.

Cumulative net cash provided by operating activities at the end of the second quarter of 2021 was $457 million compared with $231 million a year ago. Capital expenditure for the same period was $69 million compared with $108 million a year ago.

Guidance

For the third quarter of 2021, Edwards Lifesciences expects adjusted EPS in the range of 50-56 cents. The Zacks Consensus Estimate for the same is currently pegged at 55 cents.

The company projects third-quarter 2021 sales revenues in the range of $1.29-$1.37 billion. The Zacks Consensus Estimate for the same is currently pegged at $1.29 billion, which matches the low end of the company-provided guidance.

For 2021, the company narrowed its projection of adjusted EPS to the high end of the previously-announced $2.07 to $2.27 range. The Zacks Consensus Estimate for the same is currently pegged at $2.21.

For the year, the company raised its anticipation for sales to the range of $5.2-$5.4 billion from the previously-guided range of $4.9-$5.3 billion. The Zacks Consensus Estimate for the same is currently pegged at $5.18 billion.

Our Take

Edwards Lifesciences exited the second quarter of 2021 with better-than-expected results amid post-pandemic business recovery. Strong sales growth across all four product groups, led by steady improvement in TAVR procedure volumes worldwide, buoys optimism. We are upbeat about the strong adoption of the INSPIRIS aortic surgical valve and the KONECT aortic valve conduit. Continued strong adoption of the SAPIEN 3 Ultra platform and the PASCAL system across Europe looks encouraging as well. Strong demand for the company’s products used in high-risk surgeries and recovery in the ClearSight non-invasive finger cuff in elective procedures are impressive. The company has raised its full-year 2021 outlook, which is indicative of the continuation of this bullish trend.

However, continued choppy market conditions due to the unrelenting spread of coronavirus are concerning. Increase in operating cost is worrying as well. Moreover, tough competition in the cardiac devices market and reimbursement issues persist.

Zacks Rank and Other Stocks to Consider

The company currently carries a Zacks Rank #2 (Buy).

Other similar-ranked stocks in the broader medical space that have already announced their quarterly results are Boston Scientific Corporation (BSX - Free Report) , West Pharmaceutical Services, Inc. (WST - Free Report) and Laboratory Corporation of America Holdings (LH - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Boston Scientific reported second-quarter 2021 adjusted EPS of 40 cents, which beat the Zacks Consensus Estimate by 8.1%. Revenues of $3.08 billion outpaced the consensus mark by 4.4%.

West Pharmaceutical reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%.

LabCorp reported second-quarter 2021 adjusted EPS of $6.13, surpassing the Zacks Consensus Estimate by 8.7%. Revenues of $3.84 billion exceeded the Zacks Consensus Estimate by 6.9%.