Edwards Lifesciences Corporation
(
EW
) is scheduled to release its first quarter fiscal 2012 results on
Tuesday, April 24, 2012 after the market closes.
The company is expected to earn 48 cents per share during the
quarter on $450 million in revenues, according to the Zacks
Consensus Estimate. The consensus estimate is lower than the
year-ago quarter's earnings of 53 cents per share. As per Edwards'
guidance (provided along with fiscal 2011 results), adjusted
earnings per share ("EPS") are expected in the range of 47−49 cents
with revenues of $440−$460 million.
Previous Quarter Recap
Edwards reported an adjusted EPS of 62 cents in the fourth
quarter of fiscal 2011, surpassing both the Zacks Consensus
Estimate of 59 cents and the year-ago quarter's adjusted EPS of 55
cents. For the full year, the adjusted EPS came in at $2.02, ahead
of the Zacks Consensus Estimate of $1.99 and $1.84 recorded a year
ago.
Revenues increased 9.6% year over year (underlying sales growth
of 8.3%) to $430.2 million during the quarter, missing the Zacks
Consensus Estimate of $447 million. For the fiscal year, revenues
increased 16% to $1.68 billion, nominally missing the Zacks
Consensus Estimate of $1.69 billion.
Heart Valve Therapy remained the strongest segment at Edwards
with an underlying growth of 12.5% to $256.6 million during the
quarter. Transcatheter heart valve ("THV") sales were $93.2
million, up 42.7% year over year with US sales (including both
clinical and commercial) of $17.1 million. Surgical heart
valve sales increased 1.6% to $163.4 million. The other segments of
the company, namely Critical Care, Cardiac Surgery Systems and
Vascular recorded sales of $133.3 million (underlying growth of
4.5%), $27.2 million (up 8%) and $13.1 million (down 3.2%),
respectively.
Agreement of Analysts
Estimate revisions among the analysts for the first quarter have
trended on the negative. Out of 19 analysts covering the stock, 2
have lowered their estimates over the last 30 days with 1 downward
revision in the past week. The negative scenario persists for the
current fiscal with 6 analysts out of 20 analysts lowering their
estimates in the last 30 days. None of the analysts has raised
their estimates.
Apart from the uncertain reimbursement scenario for Edwards'
Sapien THV, we believe the cautious stand adopted by the analysts
is due to the uninspiring US sales of the device. Moreover, the
uncertain economy in Europe affected procedure volumes and Sapien
sales in its turn. The situation in Europe has become more
competitive with the recent launch of valves by JenaValve
Technology and Symetis.
Current investor focus is on the outcome of the Advisory Panel
of the US Food and Drug Administration ("FDA"), which will review
Sapien in high risk patients on June 13, 2012. This is crucial as
the company's THV sales guidance assumes approval for the high-risk
patient population by June 2012. In March 2012, Edwards had
presented positive long-term data from Cohort A of the PARTNER
trial at a conference in Chicago. The study evaluated patients at
high risk of surgery who were either treated with surgical aortic
valve replacement or with Sapien THV.
Magnitude of Estimate Revisions
Despite a few downward revisions from the analyst community over
the past 7 and 30-day periods, the consensus estimate for the
current quarter has remained static at 48 cents over the last 30
days. However, subsequent to the release of fiscal 2011 results,
estimates have dropped from 55 cents. For the current fiscal, the
consensus estimate has come down by 5 cents to $2.66 over the past
month.
Surprise
During the last fiscal, Edwards exceeded estimates in two
quarters with a positive four-quarter average of 6.68%. This
indicates that, on an average, the company has exceeded the Zacks
Consensus Estimate by this magnitude over the last four
quarters.
Our Recommendation
The development of the Sapien portfolio holds immense potential
for Edwards as it provides surgeons the option to eliminate the
necessity of open heart procedures. While the company has the first
mover advantage in the US with its launch of Sapien in November
2011, the scenario in Europe is competitive with the presence of
Medtronic
(
MDT
) and other players. Besides, economic uncertainty in Europe
adversely affected Edwards' THV sales during fourth-quarter 2011.
We also remain concerned about sales of Sapien in the US due to
uncertainty related to reimbursement. If the uptake of Sapien in US
falls short of estimates, the company might have to lower its THV
sales guidance for the year.
We have a Neutral recommendation for Edwards. The stock retains
a Zacks #3 Rank (Hold) in the short term.
EDWARDS LIFESCI (
EW
): Free Stock Analysis Report
MEDTRONIC (
MDT
): Free Stock Analysis Report
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