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Is it the Right Time to Hold EW Stock in Your Portfolio Now?
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Edwards Lifesciences’ (EW - Free Report) strategic decision to divest its Critical Care segment aligns with its vision to create a comprehensive portfolio for structural heart disease. Innovations such as the RESILLIA technology enhance the performance of the company’s TAVR (Transcatheter Aortic Valve Replacement) business. Additionally, progress within the TMTT (Transcatheter Mitral and Tricuspid Therapies) portfolio instils optimism.
However, adverse macroeconomic impacts and currency fluctuations raise concerns for Edwards’ operations.
In the past year, this Zacks Rank #3 (Hold) stock has dropped 8.6% against the 22.4% rise of the industry and the S&P 500 composite’s gain of 33.8%.
The renowned global medical device company has a market capitalization of $39.22 billion. EW’s earnings surpassed estimates in one of the trailing four quarters and matched on three occasions, the average surprise of 0.8%.
Factors Driving EW Stock
Critical Care Divestment — A Strategic Move: On June 3, 2024, Edwards announced an agreement to sell off its Critical Care division, one of its rapidly growing businesses. The strategic sale to Becton Dickinson and Company will give Edwards more flexibility to invest in technologies for aortic, mitral, tricuspid and pulmonic patients, and new therapeutic areas for interventional heart failure. The deal is expected to close in the late third quarter of 2024, as updated on the latest earnings call.
The decision to separate Critical Care aligns with Edwards’ vision to develop the most comprehensive structural heart disease portfolio. In the second quarter of 2024, the business generated 7% year-over-year sales growth driven by contributions from its SMART recovery technologies, including the Acumen IQ sensor, Swan-Ganz catheters and pressure monitoring devices used in the ICU.
Image Source: Zacks Investment Research
TAVR Holds Potential: The company’s TAVR platform is well-positioned to drive strong, sustainable growth, supported by greater awareness, patient activation, advances in new technologies such as RESILIA as well as indication expansion and increased global adoption. Internationally, Japan registered a double-digit sales growth in the second quarter driven by the SAPIEN 3 Ultra RESILIA valve.
RESILIA features unique anti-calcification properties that further elevate the performance of the SAPIEN 3 platform. The company is focusing on expanding the therapy for aortic stenosis, a largely undertreated disease among the elderly in Japan. In Europe, the momentum led by the newly launched SAPIEN 3 Ultra RESILIA has brought much satisfaction to the company. Moreover, the next-generation SAPIEN X4 system is also in development.
TMTT Portfolio Holds Potential: Edwards Lifesciences’ is focused on three key value drivers to transform care for mitral and tricuspid patients — offering differentiated therapies for complex mitral and tricuspid anatomies, positive clinical trial results to support approvals and adoption and favorable real-world clinical outcomes. In the second quarter, the segment achieved a 75% increase compared to the prior year, driven by the PASCAL repair system globally and the early commercial introduction of EVOQUE in the United States and Europe.
Earlier this year, the EVOQUE system became the world's first transcatheter valve replacement therapy to receive regulatory approval to treat tricuspid regurgitation. The company is expanding its availability by opening new centers both in Europe and the United States, aiming to address the significant unmet need in this patient population who has limited options for treatment. In mitral replacement, Edwards looks forward to achieving CE Mark approval for SAPIEN M3 ahead of the previous mid-2025-time frame.
What Weighs on Edwards Stock?
Macro Concerns Put Pressure on the Bottom Line: Edwards’ extensive global operations overseas manufacturing facilities and suppliers bring certain financial, economic, political and other risks. Any significant increases in the cost of raw materials, led by inflationary pressure, supply constraints stemming from geopolitical complications, regulatory changes, or otherwise, could weigh heavily on the company’s operating results. Additionally, the medical procedure rates and demand for its products continue to fluctuate as the medical system rebalances its infrastructure and resources in a post-COVID-19 market. These are putting significant pressure on the margins of medical device companies like Edwards.
Foreign Exchange Headwinds: Foreign exchange is a major headwind for Edwards Lifesciences’ as a considerable percentage of its revenues is coming from outside the United States. We remain worried about the significant challenges the company had to face, owing to unfavorable foreign currency impact that has been adversely affecting its gross margin over the past few quarters. In the second quarter, foreign exchange rates decreased the adjusted sales growth by $17.6 million compared to the prior year.
EW Stock Estimate Trends
The Zacks Consensus Estimate for Edwards Lifesciences’ 2024 earnings per share has remained constant at $2.71 from $2.77 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $6.47 billion. This suggests a 7.8% rise from the year-ago reported number.
TransMedix Group’s earnings are expected to surge 259.7% in 2024. Its shares have rallied 173.5% compared with the industry’s 22.4% growth in the past year. TMDX’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 287.5%.
AxoGen has an estimated 2024 earnings growth rate of 94.1% compared with the industry’s 12.8%. Shares of the company have surged 194.6% compared with the industry’s 22.3% growth in the past year. AXGN’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 96.5%.
Phibro Animal Health has an estimated fiscal 2025 earnings growth rate of 21% compared with the industry’s 12.6% growth. Shares of the company have rallied 72.7% compared with the industry’s 25.8% growth in the past year. PAHC’s earnings surpassed estimates in three of the trailing four quarters and missed on one occasion, the average surprise being 4.1%.
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Is it the Right Time to Hold EW Stock in Your Portfolio Now?
Edwards Lifesciences’ (EW - Free Report) strategic decision to divest its Critical Care segment aligns with its vision to create a comprehensive portfolio for structural heart disease. Innovations such as the RESILLIA technology enhance the performance of the company’s TAVR (Transcatheter Aortic Valve Replacement) business. Additionally, progress within the TMTT (Transcatheter Mitral and Tricuspid Therapies) portfolio instils optimism.
However, adverse macroeconomic impacts and currency fluctuations raise concerns for Edwards’ operations.
In the past year, this Zacks Rank #3 (Hold) stock has dropped 8.6% against the 22.4% rise of the industry and the S&P 500 composite’s gain of 33.8%.
The renowned global medical device company has a market capitalization of $39.22 billion. EW’s earnings surpassed estimates in one of the trailing four quarters and matched on three occasions, the average surprise of 0.8%.
Factors Driving EW Stock
Critical Care Divestment — A Strategic Move: On June 3, 2024, Edwards announced an agreement to sell off its Critical Care division, one of its rapidly growing businesses. The strategic sale to Becton Dickinson and Company will give Edwards more flexibility to invest in technologies for aortic, mitral, tricuspid and pulmonic patients, and new therapeutic areas for interventional heart failure. The deal is expected to close in the late third quarter of 2024, as updated on the latest earnings call.
The decision to separate Critical Care aligns with Edwards’ vision to develop the most comprehensive structural heart disease portfolio. In the second quarter of 2024, the business generated 7% year-over-year sales growth driven by contributions from its SMART recovery technologies, including the Acumen IQ sensor, Swan-Ganz catheters and pressure monitoring devices used in the ICU.
Image Source: Zacks Investment Research
TAVR Holds Potential: The company’s TAVR platform is well-positioned to drive strong, sustainable growth, supported by greater awareness, patient activation, advances in new technologies such as RESILIA as well as indication expansion and increased global adoption. Internationally, Japan registered a double-digit sales growth in the second quarter driven by the SAPIEN 3 Ultra RESILIA valve.
RESILIA features unique anti-calcification properties that further elevate the performance of the SAPIEN 3 platform. The company is focusing on expanding the therapy for aortic stenosis, a largely undertreated disease among the elderly in Japan. In Europe, the momentum led by the newly launched SAPIEN 3 Ultra RESILIA has brought much satisfaction to the company. Moreover, the next-generation SAPIEN X4 system is also in development.
TMTT Portfolio Holds Potential: Edwards Lifesciences’ is focused on three key value drivers to transform care for mitral and tricuspid patients — offering differentiated therapies for complex mitral and tricuspid anatomies, positive clinical trial results to support approvals and adoption and favorable real-world clinical outcomes. In the second quarter, the segment achieved a 75% increase compared to the prior year, driven by the PASCAL repair system globally and the early commercial introduction of EVOQUE in the United States and Europe.
Earlier this year, the EVOQUE system became the world's first transcatheter valve replacement therapy to receive regulatory approval to treat tricuspid regurgitation. The company is expanding its availability by opening new centers both in Europe and the United States, aiming to address the significant unmet need in this patient population who has limited options for treatment. In mitral replacement, Edwards looks forward to achieving CE Mark approval for SAPIEN M3 ahead of the previous mid-2025-time frame.
What Weighs on Edwards Stock?
Macro Concerns Put Pressure on the Bottom Line: Edwards’ extensive global operations overseas manufacturing facilities and suppliers bring certain financial, economic, political and other risks. Any significant increases in the cost of raw materials, led by inflationary pressure, supply constraints stemming from geopolitical complications, regulatory changes, or otherwise, could weigh heavily on the company’s operating results. Additionally, the medical procedure rates and demand for its products continue to fluctuate as the medical system rebalances its infrastructure and resources in a post-COVID-19 market. These are putting significant pressure on the margins of medical device companies like Edwards.
Foreign Exchange Headwinds: Foreign exchange is a major headwind for Edwards Lifesciences’ as a considerable percentage of its revenues is coming from outside the United States. We remain worried about the significant challenges the company had to face, owing to unfavorable foreign currency impact that has been adversely affecting its gross margin over the past few quarters. In the second quarter, foreign exchange rates decreased the adjusted sales growth by $17.6 million compared to the prior year.
EW Stock Estimate Trends
The Zacks Consensus Estimate for Edwards Lifesciences’ 2024 earnings per share has remained constant at $2.71 from $2.77 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $6.47 billion. This suggests a 7.8% rise from the year-ago reported number.
Top MedTech Picks
Some better-ranked stocks in the broader medical space are TransMedix Group (TMDX - Free Report) , AxoGen (AXGN - Free Report) and Phibro Animal Health (PAHC - Free Report) . While TransMedix Group currently sports a Zacks Rank #1 (Strong Buy), AxoGen and Phibro Animal Health carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
TransMedix Group’s earnings are expected to surge 259.7% in 2024. Its shares have rallied 173.5% compared with the industry’s 22.4% growth in the past year. TMDX’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 287.5%.
AxoGen has an estimated 2024 earnings growth rate of 94.1% compared with the industry’s 12.8%. Shares of the company have surged 194.6% compared with the industry’s 22.3% growth in the past year. AXGN’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 96.5%.
Phibro Animal Health has an estimated fiscal 2025 earnings growth rate of 21% compared with the industry’s 12.6% growth. Shares of the company have rallied 72.7% compared with the industry’s 25.8% growth in the past year. PAHC’s earnings surpassed estimates in three of the trailing four quarters and missed on one occasion, the average surprise being 4.1%.