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Edwards Lifesciences (EW) Q1 Earnings Beat, Revenues Miss
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Edwards Lifesciences Corporation’s(EW - Free Report) first-quarter 2018 adjusted earnings per share (EPS) came in at $1.22 while reported EPS was 96 cents.
The adjusted EPS figure beat the Zacks Consensus Estimate of $1.10 by 10.9%. Moreover, adjusted earnings improved 29.8% year over year, primarily driven by strong sales growth at the transcatheter heart valves business.
Sales Details
First-quarter sales improved 1.3% to $894.8 million but fell short of the Zacks Consensus Estimate of $930.2 million by 3.8%. Underlying sales increased 9.3% (including the impact of Germany stocking sales as customers in the nation chose to purchase additional inventory of the SAPIEN 3 valve in anticipation of a potential supply interruption resulting from recent intellectual property litigation).
Revenues were primarily driven by considerable growth in transcatheter heart valve sales as well as strong performance by Critical Care product line.
Segmental Details
In the first quarter, the company reported Transcatheter Heart Valve Therapy (THVT) sales of $551.6 million, reflecting 2.3% growth over the prior-year quarter. In the United States, THVT procedures grew in mid-teens year over year. Growth was driven by excellent clinical performance by SAPIEN 3 as well as continued strong therapy implementation across all regions.
Surgical Heart Valve Therapy sales in the quarter totaled $179.5 million, down 10% from the prior-year quarter. This includes a sales return reserve for conversion to a consignment inventory model. However, Edwards Lifesciences continued to witness solid uptake of the EDWARDS INTUITY Elite valve system along with strong demand for the latest INSPIRIS RESILIA aortic valve in the United States. Further, the company’s latest products drove underlying sales growth at a rate which surpassed the total procedure growth rate.
Edwards Lifesciences Corporation Price, Consensus and EPS Surprise
Critical Care sales were $163.7 million in the reported quarter, representing an increase of 13% from first-quarter 2017. The upside can be attributed to solid growth across all product categories, largely led by HemoSphere advanced monitoring platform along with solid growth in the United States and the Asia Pacific.
Margins
In the first quarter, gross margin contracted 170 basis points (bps) to 73.9% owing to adverse currency movements and continued operational investments. However, this was partially offset by more profitable product mix led by growing sales of transcatheter valves.
SG&A expenses rose 11.5% year over year to $256 million on account of sales and personnel-related expenses, as well as strengthening of euro in comparison with the dollar. R&D expenditures increased 11.3% year over year to $143.2 million owing to continued investments in the transcatheter aortic valve and mitral valve program along with expenditures on clinical trials. Accordingly, adjusted operating margin in the quarter contracted 570 bps to 29.3%.
Cash Position
Edwards Lifesciences exited the first quarter with cash and cash equivalents and short-term investments of $1.50 billion compared with $1.34 billion at the end of 2017. Long-term debt in the reported quarter totaled $456 million versus $438.4 million at 2017-end.
Cash flow from operating activities was $151.3 million in the first quarter. Excluding capital spending of $43.2 million, free cash flow was $108.1 million. During the quarter, average diluted shares outstanding totaled 215.1 million.
2018 Guidance Raised
Edwards Lifesciences raised its 2018 adjusted EPS expectations to $4.50-$4.70 from the previous $4.43–$4.63. The Zacks Consensus Estimate for full-year adjusted EPS stands at $4.52, near the low end of the company’s guided range.
However, the company continues to maintain sales expectations at the high end of the previously projected range of $3.5-$3.9 billion. The Zacks Consensus Estimate for full-year revenues is $3.85 billion, within the guided range.
For the second quarter of 2018, the company projects sales between $950 million and $1 billion. The Zacks Consensus Estimate for revenues is $964.6 million, within the company’s estimated range. The company forecasts adjusted EPS between $1.05 and $1.15. Meanwhile, the Zacks Consensus Estimate for adjusted EPS is $1.16, which is above the company‘s forecasted range.
Our Take
Edwards Lifesciences exited the first quarter on a mixed note. Strong transcatheter valve sales in the domestic market as well as overseas is a major positive. The raised 2018 EPS guidance buoys optimism.
Management expects to gain traction in the ever-expanding TAVR market based on increasing preference for transcatheter aortic valve replacement as well as compelling clinical evidence, leading to strong adoption of THV therapy. However, tough competition in the cardiac devices market and reimbursement issues continue to raise concern.
Abaxis is expected to release fourth-quarter fiscal 2018 results on Apr 26. The Zacks Consensus Estimate for adjusted EPS is 32 cents and for revenues is $67 million.
Bio-Rad is expected to report first-quarter 2018 results on May 3. The Zacks Consensus Estimate for adjusted EPS is 90 cents and for revenues is $529.5 million.
ResMed is slated to release third-quarter fiscal 2018 results on Apr 26. The Zacks Consensus Estimate for adjusted EPS is 83 cents and for revenues is $564.9 million.
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
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Edwards Lifesciences (EW) Q1 Earnings Beat, Revenues Miss
Edwards Lifesciences Corporation’s (EW - Free Report) first-quarter 2018 adjusted earnings per share (EPS) came in at $1.22 while reported EPS was 96 cents.
The adjusted EPS figure beat the Zacks Consensus Estimate of $1.10 by 10.9%. Moreover, adjusted earnings improved 29.8% year over year, primarily driven by strong sales growth at the transcatheter heart valves business.
Sales Details
First-quarter sales improved 1.3% to $894.8 million but fell short of the Zacks Consensus Estimate of $930.2 million by 3.8%. Underlying sales increased 9.3% (including the impact of Germany stocking sales as customers in the nation chose to purchase additional inventory of the SAPIEN 3 valve in anticipation of a potential supply interruption resulting from recent intellectual property litigation).
Revenues were primarily driven by considerable growth in transcatheter heart valve sales as well as strong performance by Critical Care product line.
Segmental Details
In the first quarter, the company reported Transcatheter Heart Valve Therapy (THVT) sales of $551.6 million, reflecting 2.3% growth over the prior-year quarter. In the United States, THVT procedures grew in mid-teens year over year. Growth was driven by excellent clinical performance by SAPIEN 3 as well as continued strong therapy implementation across all regions.
Surgical Heart Valve Therapy sales in the quarter totaled $179.5 million, down 10% from the prior-year quarter. This includes a sales return reserve for conversion to a consignment inventory model. However, Edwards Lifesciences continued to witness solid uptake of the EDWARDS INTUITY Elite valve system along with strong demand for the latest INSPIRIS RESILIA aortic valve in the United States. Further, the company’s latest products drove underlying sales growth at a rate which surpassed the total procedure growth rate.
Edwards Lifesciences Corporation Price, Consensus and EPS Surprise
Edwards Lifesciences Corporation Price, Consensus and EPS Surprise | Edwards Lifesciences Corporation Quote
Critical Care sales were $163.7 million in the reported quarter, representing an increase of 13% from first-quarter 2017. The upside can be attributed to solid growth across all product categories, largely led by HemoSphere advanced monitoring platform along with solid growth in the United States and the Asia Pacific.
Margins
In the first quarter, gross margin contracted 170 basis points (bps) to 73.9% owing to adverse currency movements and continued operational investments. However, this was partially offset by more profitable product mix led by growing sales of transcatheter valves.
SG&A expenses rose 11.5% year over year to $256 million on account of sales and personnel-related expenses, as well as strengthening of euro in comparison with the dollar. R&D expenditures increased 11.3% year over year to $143.2 million owing to continued investments in the transcatheter aortic valve and mitral valve program along with expenditures on clinical trials. Accordingly, adjusted operating margin in the quarter contracted 570 bps to 29.3%.
Cash Position
Edwards Lifesciences exited the first quarter with cash and cash equivalents and short-term investments of $1.50 billion compared with $1.34 billion at the end of 2017. Long-term debt in the reported quarter totaled $456 million versus $438.4 million at 2017-end.
Cash flow from operating activities was $151.3 million in the first quarter. Excluding capital spending of $43.2 million, free cash flow was $108.1 million. During the quarter, average diluted shares outstanding totaled 215.1 million.
2018 Guidance Raised
Edwards Lifesciences raised its 2018 adjusted EPS expectations to $4.50-$4.70 from the previous $4.43–$4.63. The Zacks Consensus Estimate for full-year adjusted EPS stands at $4.52, near the low end of the company’s guided range.
However, the company continues to maintain sales expectations at the high end of the previously projected range of $3.5-$3.9 billion. The Zacks Consensus Estimate for full-year revenues is $3.85 billion, within the guided range.
For the second quarter of 2018, the company projects sales between $950 million and $1 billion. The Zacks Consensus Estimate for revenues is $964.6 million, within the company’s estimated range. The company forecasts adjusted EPS between $1.05 and $1.15. Meanwhile, the Zacks Consensus Estimate for adjusted EPS is $1.16, which is above the company‘s forecasted range.
Our Take
Edwards Lifesciences exited the first quarter on a mixed note. Strong transcatheter valve sales in the domestic market as well as overseas is a major positive. The raised 2018 EPS guidance buoys optimism.
Management expects to gain traction in the ever-expanding TAVR market based on increasing preference for transcatheter aortic valve replacement as well as compelling clinical evidence, leading to strong adoption of THV therapy. However, tough competition in the cardiac devices market and reimbursement issues continue to raise concern.
Zacks Rank & Key Picks
Edwards Lifesciences has a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader medical sector are Abaxis, Inc. , Bio-Rad Laboratories, Inc. (BIO - Free Report) and ResMed Inc. (RMD - Free Report) ). While Abaxis and Bio-Rad sport a Zacks Rank #1 (Strong Buy) ResMed carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Abaxis is expected to release fourth-quarter fiscal 2018 results on Apr 26. The Zacks Consensus Estimate for adjusted EPS is 32 cents and for revenues is $67 million.
Bio-Rad is expected to report first-quarter 2018 results on May 3. The Zacks Consensus Estimate for adjusted EPS is 90 cents and for revenues is $529.5 million.
ResMed is slated to release third-quarter fiscal 2018 results on Apr 26. The Zacks Consensus Estimate for adjusted EPS is 83 cents and for revenues is $564.9 million.
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Click here to see them >>