Edwards Lifesciences Corporation's
) first-quarter 2013 adjusted earnings per share (EPS) came in at
72 cents, up 35.8% year over year, but lagging the Zacks
Consensus Estimate of 76 cents. Adjusted EPS were also below the
company-guided range of 74-78 cents. However, including a pre-tax
gain of $83.6 million, an initial payment from
) related to the ongoing U.S. Anderson patent litigation, the
company reported a 125.5% year over year increase in EPS to
The company reported sales at $496.7 million, up 8.2% year
over year (up 10% at constant exchange rate), but 4.1% below the
Zacks Consensus Estimate of $518 million. Domestically, sales
were $227.9 million, while internationally sales were $268.8
million. The reported sales figure was also below the previously
guided range of $505-$530 million. This was primarily due to
sluggish surgical heart valve and critical care segments'
performance, which counterbalanced in the transcatheter heart
valves segment's growth.
In the first-quarter 2013, surgical heart valve therapy
product group reported sales of $198.1 million, down 2.7% year
over year (down 0.8% at constant currency). The slowdown in the
segments sales is attributable to tougher comparison and the
effect of a competitor's introduction in Japan. In spite of a
decline in revenues, the company expects the segment to register
underlying sales growth in the range of 2%-5% for the full
Globally, transcatheter heart valves (THV) product group
reported sales at $169.7 million, up almost 40% year over year.
Revenues of this product group were mainly driven by the U.S.
launch of the SAPIEN valve. Including the net stocking orders of
$6.0 million and clinical sales of $6.7 million, domestic sales
stood at $83.0 million. Internationally, THV sales increased 7.6%
year over year. For fiscal 2013, the company expects the THV
underlying sales to increase in the range of 25% - 30%.
Critical care product group sales were $128.9 million, down
3.9% year over year (down 0.2% at constant currency rate). The
downside in sales is attributable to the reduction in distributor
inventories in China. The company expects sales growth to be
between 2% and 4% on an underlying basis in fiscal 2013.
In first-quarter 2013, gross margin expanded 310 basis points
(bps) to 75.4%. The expansion in the gross margin was a result of
strong THV product sales and positive impact of foreign
Selling, general and administrative expense increased 4.5%
year over year to $185.2 million (or 37.3% of sales), primarily
driven by the U.S. Medical Device Excise Tax and U.S.
transcatheter valve expenses.
Research and development expense for the reported quarter
surged 16.3% year over year to $79.8 million (or 16.1% of sales).
The increase in research and development expense is on account of
high investments in various active heart valve clinical
Edwards exited the reported quarter with cash & cash
equivalents and short-term investments of $557.9 million, up 7%
on a sequential basis. Long-term debt of the company increased
marginally by 1.8% on a sequential basis to $192.7 million.
During the quarter, the company repurchased 1.3 million shares
for $107.7 million.
Edwards revised its guidance for fiscal 2013 in the range of
$2.0− $2.1 billion from previously guided range of $2.1−$$2.2
billion. The company also revised adjusted earnings per share in
the range of $3.00−$3.10 from previously guided adjusted earnings
per share of $3.21−$3.31.
For second quarter 2013, the company guided the revenue in the
range of $500−$550 million while the adjusted earnings per share
is projected in the band of 75−79 cents.
Edwards exited first-quarter 2013 on a sluggish note. In light
of a challenging first quarter in the form of disappointing
performance of surgical heart valve and critical care segments',
the company has lowered its guidance for revenue and earnings per
share. Inventory problems in China and competitors in Japan
remain a challenge for the company. However, the company believes
the transcatheter heart valves product group to remain as the
revenue driver and is expected to do well in the upcoming
quarters. Critical care and surgical heart valve therapy are
expected to grow at low-single digit.
Moreover, Edwards is optimistic about its research and
development investments on its product line, especially heat
valve clinical studies.
Based on the above-mentioned facts, Edwards currently carries a
Zacks Rank #3 (Hold). Other medical stocks worth considering are
), which carries a Zacks Rank #1 (Strong Buy), and
), which carries a Zacks Rank #2 (Buy).
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