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Edward Lifesciences (EW): A Beat in Store in Q3 Earnings?

We expect Edward Lifesciences Corp.EW to beat expectations when it reports third-quarter 2016 results on Oct 25, after market close. Last quarter, the company reported a positive earnings surprise of 8.47% with the trailing four-quarter average beat pegged at 8.28%. Let's see how things are shaping up prior to this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Edward Lifesciences is likely to beat earnings because it has the right combination of two key components.

Zacks ESP: Edward Lifesciences' Earnings ESP is +2.94%, since the Most Accurate estimate stands at 70 cents while the Zacks Consensus Estimate is lower at 60 cents. A favorable ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: Edward Lifesciences' currently has a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.

The combination of Edward Lifesciences' Zacks Rank #2 and +2.94% ESP makes us reasonably confident of a positive earnings beat. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

EDWARDS LIFESCI Price and EPS Surprise

EDWARDS LIFESCI Price and EPS Surprise | EDWARDS LIFESCI Quote

What's Driving the Better-than-Expected Earnings?

Edward Lifesciences posted a promising global sales performance in the last reported second quarter, primarily buoyed by strong Transcatheter Heart Valve sales. Post the second quarter, the company announced FDA approval for the expanded use of its SAPIEN 3 transcatheter heart valve for the treatment of patients with severe, symptomatic aortic stenosis who are at intermediate risk for open heart surgery. Further, the product received CE mark in Europe. The trend is expected to continue in the yet-to-be-reported third quarter of 2016.

Further, management expects significant contribution from the launch of INTUITY Elite valve system, a rapid deployment device for surgical aortic valve replacement in the U.S. under Surgical Heart Valve Therapy product group. Edward Lifesciences has already won FDA approval for the system. Under the same group, another of the company's products got CE marked - INSPIRIS RESILIA aortic valve - the first in a new class of resilient heart valves. This strategic portfolio expansion is expected to get reflected in the forthcoming quarter's top-line performances.

Edwards Lifesciences has been performing well in its critical care device segment for quite some time now. In the second quarter of 2016, sales improved 7% on an underlying basis in this segment. Meanwhile, the recent CE mark for its Acumen Hypotension Probability Indicator (HPI) is likely to help the company expand in the critical care equipment market in Europe. Management expects to maintain the first-half sales momentum at this segment going forward.

We believe these product developments will contribute to the company's top line in the third quarter.

The company continues to invest in R&D which is expected to account for approximately 16% of sales in the second half of 2016. In its early-generation CardiAQ-Edwards platform, management is in the process of implementing several enhancements, including new delivery systems and utilizing the company's advanced tissue.

Edwards Lifesciences has an impressive current year growth estimate of 25.10%, compared to the industry average of 10%.

Other Stocks to Consider

Here are a few other companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Glaukos Corporation GKOS has an earnings ESP of +200% and a Zacks Rank #1.

Penumbra, Inc. PEN has an earnings ESP of +45.45% and a Zacks Rank #2.

Invuity, Inc. IVTY has an earnings ESP of +8.07% and a Zacks Rank #2.

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EDWARDS LIFESCI (EW): Free Stock Analysis Report

PENUMBRA INC (PEN): Free Stock Analysis Report

GLAUKOS CORP (GKOS): Free Stock Analysis Report

INVUITY INC (IVTY): 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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