Edwards Lifesciences Corporation
) is scheduled to release its second quarter fiscal 2012 results on
Tuesday, July 24, 2012 after the market closes.
The company is expected to earn 65 cents per share during the
quarter on $488 million in revenues, according to the Zacks
Consensus Estimate. The consensus estimate is well above the
year-ago quarter's earnings of 49 cents per share. As per Edwards'
guidance, adjusted earnings per share are expected in the range of
64−68 cents with revenues of $470−$500 million.
Edwards reported an adjusted EPS of 53 cents, ahead of the Zacks
Consensus Estimate of 48 cents but unchanged from the first quarter
of fiscal 2011. Revenues increased 13.5% year over year (underlying
sales growth of 13.4%) to $459.2 million during the quarter,
surpassing the Zacks Consensus Estimate of $452 million.
From the first quarter, Edwards has been reporting under three
segments - Surgical Heart Valve Therapy (combination of surgical
heart valves and cardiac surgery systems), Transcatheter Heart
Valves (THV) and Critical Care (including vascular). Sales at these
segments were a respective $203.6 million, up 2.7% year over year,
$121.5 million (67.2%) and $134.1 million, (flat) during the
Edwards lowered its THV guidance for the fiscal by $30 million
to $530−$600 million. The cut in forecast was due to several
negatives like a full quarter delay in the approval of Sapien in
the high-risk patient population, dismal performance in southern
Europe and the adverse impact of foreign exchange rates. The
company expects fiscal 2012 sales to be on the lower end of the
original range of $1.95−$2.05 billion, representing approximately
20% underlying growth. Moreover, the outlook for adjusted EPS was
lowered to $2.58−$2.68 from the previous level of $2.70−$2.80.
Agreement of Analysts
Estimate revisions among the analysts for the second quarter
have trended on the positive. Out of 18 analysts covering the
stock, 2 have increased their estimates over the last 30 days with
1 upward revision in the past week. None have lowered their
estimates in the past week or month. Estimate revision trends have
been mixed for the current fiscal with 2 analysts lowering their
estimates in the last 30 days with 1 positive revision.
We expect US rollout of Sapien to progress well, especially
after reimbursement uncertainties were put to rest. On May 2, 2012,
the Centers for Medicare & Medicaid Services ("CMS") announced
its decision to reimburse transcatheter aortic valve replacement
("TAVR") procedures for US patients with symptomatic aortic
stenosis under specified criteria. In addition, center training
should also be on track.
Analyst optimism also emanated from favorable recommendation
from the US Food and Drug Administration ("FDA") for Sapien in
high-risk patients. We expect details from the company regarding
its potential launch in the US. Earlier this month, the company
received FDA nod to initiate the Transform trial, which will
evaluate the Intuity valve system in surgical aortic valve
replacement ("AVR") procedures.
Magnitude of Estimate Revisions
Despite a few upward revisions from the analyst community over
the past 7 and 30-day periods, the consensus estimate for the
current quarter has remained static at 65 cents over the last 30
days. However, estimates have increased from 59 cents over the last
90-day period. For the current fiscal, the consensus estimate also
remained unchanged at $2.66.
Edwards has exceeded estimates in two quarters among the last
four with a positive four-quarter average of 1.74%. This indicates
that, on an average, the company has exceeded the Zacks Consensus
Estimate by this magnitude over the last four quarters.
We expect the rollout of Sapien in US to be on track, especially
with the resolution of reimbursement uncertainties. Moreover, the
prospects of FDA approval of Sapien for high-risk patients have
increased with favorable recommendation from the advisory panel.
Although Edwards 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
) and other players. Medtronic,
St Jude Medical
) are also on track to release transcatheter valves in the US over
the next few years. Besides, economic uncertainty in Europe remains
a major overhang for the company.
We have a Neutral recommendation for Edwards. The stock retains
a Zacks #3 Rank (Hold) in the short term.
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