Earnings Preview: EW - Analyst Blog

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Edwards Lifesciences Corporation ( EW ) 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.

First-Quarter Recap

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 quarter.

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.

Our Recommendation

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 Medtronic ( MDT ) and other players. Medtronic, Boston Scientific ( BSX ) and St Jude Medical ( STJ ) 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.

BOSTON SCIENTIF (BSX): Free Stock Analysis Report

EDWARDS LIFESCI (EW): Free Stock Analysis Report

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ST JUDE MEDICAL (STJ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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