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Edwards Lifesciences (EW) at 52-Week High: What's Driving It?

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Edwards Lifesciences Corporation (EW - Free Report) reported a new 52-week high of $129.12 on Dec 23, before closing the session marginally lower at $128.57.

The company’s shares have charted a solid trajectory in recent times, appreciating 42% over the past year, ahead of the 9.9% rise of the industry it belongs to and 27.1% surge of the S&P 500 composite.

Over the past five years, the company registered earnings growth of 19.0%, ahead of the industry’s 3.3% rise and the S&P 500’s 2.8% increase. The company’s long-term expected growth rate of 14.0% compares with the industry’s growth projection of 15.9% and the S&P 500’s estimated 11.7% increase.

Edwards Lifesciences is well poised for growth in the coming quarters, backed by strength across the Transcatheter Aortic Valve Replacement (“TAVR”) and Critical Care arms. Strong growth in the Surgical Structural Heart business during the third quarter of 2021 amid pandemic-led headwinds buoys optimism. Robust uptake of the SAPIEN platform is an added plus. Further, a good solvency position bodes well for the stock.

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Let’s delve deeper.

Key Drivers

Critical Care Business Grows: The market is upbeat about Edwards Lifesciences’ Critical Care segment, which registered year-over-year growth in the third quarter, both on a reported and 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. Further, True Wave disposable pressure monitoring devices used in the ICU witnessed high demand due to increased hospitalizations and demand for products used in high-risk surgery. The company also witnessed greater uptake for the ClearSight non-invasive finger cup used in elective procedures during the quarter.

Surgical Structural Heart, a Promising Business: Edwards Lifesciences registered strong growth within the Surgical Structural Heart business during the third quarter despite resurgence in COVID-19 cases. The company continued to witness SABR procedure growth across most regions. The company also registered steady global adoption of Edwards RESILIA tissue valves, including the INSPIRIS RESILIA aortic valve, the KONECT RESILIA valves conduit and the MITRIS RESILIA mitral valve. A steady improvement in global surgical procedure volumes during the reported quarter raises our optimism.

TAVR Holds Potential: The TAVR segment also continued to perform well amid pandemic-led business challenges. In the third quarter, the segment registered 12% growth from the prior-year figure on a reported basis and 14% on an underlying basis. The growth was primarily driven by increased adoption of the company’s technologies, including the SAPIEN platform. The company continued to witness strong TAVR adoption in Japan during the quarter. Additionally, Edwards Lifesciences received reimbursement approval for the treatment of patients at low surgical risk.

Strong Solvency: Edwards Lifesciences exited the third quarter with cash and cash equivalents, and short-term investments of $1.51 billion. Meanwhile, long-term debt came in at $595.5 million, much lower than the quarter’s cash and cash equivalent as well as the short-term investments level, indicating strong solvency. In addition, we may also note that the company has no current-year debt on its balance sheet. This is good news at a time when the coronavirus mayhem has forced the corporate sector to halt production and supply.

Downsides

On the other hand, a host of factors have been deterring Edwards Lifesciences’ rally of late.

During the third quarter, Edwards Lifesciences’ selling, general and administrative expenses rose 18.6% year over year, whereas research and development expenditures were up 21.7% year over year. These mounting expenses drove operating costs by 19.8%, which is building pressure on the company’s bottom line. Meanwhile, stiff competition in the cardiac devices market and persistent reimbursement issues are likely to impede the company’s growth further.

Zacks Rank and Key Picks

Currently, Edwards Lifesciences carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical space are Apollo Endosurgery, Inc. (APEN - Free Report) , Cerner Corporation (CERN - Free Report) and West Pharmaceutical Services, Inc. (WST - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Apollo Endosurgery has a long-term earnings growth rate of 7%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 25.6%, on average.

Apollo Endosurgery has outperformed its industry over the past year. APEN has gained 119% versus the 9.8% industry growth.

Cerner has a long-term earnings growth rate of 13.3%. The company surpassed earnings estimates in the trailing three quarters and was in line in one, delivering a surprise of 3.2%, on average.

Cerner has outperformed its industry over the past year. CERN has gained 17.6% versus the 39.9% industry decline.

West Pharmaceutical has a long-term earnings growth rate of 27.6%. The company surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 29.4%.

West Pharmaceutical has outperformed its industry over the past year. WST has rallied 65.7% versus the industry’s 15.5% rise.