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Edwards Lifesciences (EW) Beats on Q1 Earnings, Margins Down

Edwards Lifesciences Corporation’s EW first-quarter 2021 adjusted earnings per share (“EPS”) of 54 cents surpassed the Zacks Consensus Estimate by 14.9% and improved 8% year over year.

GAAP EPS was also 54 cents in the quarter compared with the year-ago EPS of 49 cents, reflecting a 10.2% improvement.

Sales Details

First-quarter net sales were $1.22 billion, up 7.8% year over year on a reported basis. On an underlying basis, the growth was 5%. Moreover, the metric surpassed the Zacks Consensus Estimate by 4.9%.

Revenues were primarily driven by improvements in structural heart procedures volumes through the winter months and a gradual business recovery.

Segmental Details

In the first quarter, global sales in the Transcatheter Aortic Valve Replacement (“TAVR”) product group amounted to $791.7 million, up 6.7% from the prior-year figure on a reported basis. On an underlying basis, the growth was 4.1%. Average selling prices were stable worldwide. In the United States, total TAVR sales were flat year over year. Outside the United States, total TAVR sales increased in the low-double digits on a year-over-year basis.

Transcatheter Mitral and Tricuspid Therapies sales totaled $16.3 million, up 56.7% from the prior-year figure on a reported basis. On an underlying basis, the improvement was 46.1%. The company continued to register strong momentum on increased adoption of the PASCAL system and activation of more centers across Europe.

Edwards Lifesciences Corporation Price, Consensus and EPS Surprise

Edwards Lifesciences Corporation Price, Consensus and EPS Surprise

Edwards Lifesciences Corporation price-consensus-eps-surprise-chart | Edwards Lifesciences Corporation Quote

Surgical Structural Heart’s sales in the quarter totaled $213 million, up 10.1% from the year-ago quarter on a reported basis and 6.7% on an underlying basis. Robust adoption of the INSPIRIS RESILIA aortic surgical valve and the KONECT RESILIA aortic tissue valve conduit boosted the top line. Improvement across all regions during the quarter also drove revenues.

Critical Care sales totaled $195.6 million in the first quarter, up 7.1% from the year-ago quarter on a reported basis and 4.4% on an underlying basis. The revenue uptick resulted from the increased sales of technologies for operating rooms and intensive care unit. Also, increase in orders for the HemoSphere advanced monitoring platform on the back of an improvement in hospital capital spending contributed to the top line. Strong demand for the company’s products used in high-risk surgeries and recovery in the ClearSight non-invasive finger cuff in elective procedures also drove revenues.

Margins

In the first quarter, gross profit was $923.2 million, up 6.9%. Gross margin contracted 63 basis points (bps) to 75.9%.

The company-provided adjusted gross margin was 76%, reflecting a year-over-year contraction of 70 bps. This resulted from the negative impact of foreign exchange and incremental costs associated with responding to COVID-19, partially offset by improved manufacturing efficiencies.

Selling, general and administrative expenses rose 7.5% year over year to $330.8 million, primarily due to strengthening of foreign currencies (especially the Euro) and personnel-related costs. This was partially offset by pandemic-led reduced travel spending.

Research and development expenditures were $207 million, up 10.5% year over year. This primarily resulted from continued investments in the company's transcatheter innovations. These developments drove operating costs up by 8.6% to $537.8 million.

During the reported quarter, operating income was up 4.6% year over year to $385.4 million. However, operating margin contracted 96 bps to 31.7%.

Cash Position

Edwards Lifesciences exited the first quarter of 2021 with cash and cash equivalents and short-term investments of $1.33 billion compared with $1.40 billion recorded at the end of 2020. Long-term debt was $595.2 million at the end of the first quarter of 2021, up from $595 million at the end of 2020.

Net cash provided by operating activities at the end of the first quarter of 2021 was $301 million compared with $207 million a year ago. Capital expenditure rose to $106 million from $82 million a year ago.

2021 Guidance

For the second quarter of 2021, Edwards Lifesciences expects adjusted EPS in the range of 54-60 cents. The Zacks Consensus Estimate for the same is currently pegged at 51 cents.

The company projects second-quarter 2021 sales revenues to be in the range of $1.25-$1.33 billion. The Zacks Consensus Estimate for the same is currently pegged at $1.25 billion, which matches the lower end of the company-provided guidance.

For 2021, the company raised its projection of adjusted EPS to the range of $2.07-$2.27 from the earlier provided range of $2-$2.20. The Zacks Consensus Estimate for the same is currently pegged at $2.13.

However, for the year, the company reiterated its anticipation of sales to be in the range of $4.9-$5.3 billion. The Zacks Consensus Estimate for the same is currently pegged at $5.09 billion.

Our Take

Edwards Lifesciences exited the first quarter of 2021 with better-than-expected results despite the pandemic-induced challenging business environment. We are upbeat about the strong adoption of the INSPIRIS aortic surgical valve and the KONECT aortic valve conduit. Continued strong adoption of the SAPIEN 3 Ultra platform, along with receipt of CE Mark for SAPIEN 3, looks encouraging as well. Steady improvement in TAVR procedure volumes worldwide buoys optimism. Robust demand for TruWave is impressive.

However, continued choppy market conditions due to the unrelenting spread of coronavirus are worrying. Contraction of both margins also does not bode well for the company. Moreover, tough competition in the cardiac devices market and reimbursement issues persist.

Zacks Rank & Key Picks

Edwards Lifesciences currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are LeMaitre Vascular, Inc. LMAT, Align Technology, Inc. ALGN and Omnicell, Inc. OMCL.

The Zacks Consensus Estimate for LeMaitre’s first-quarter 2021 revenues is pegged at $35.6 million, suggesting a year-over-year improvement of 16.4%. The same for EPS stands at 28 cents, indicating growth of 75% from the year-ago reported figure. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Align Technology’s first-quarter 2021 revenues is pegged at $826.2 million, implying 49.9% increase from the year-earlier reported figure. The same for EPS stands at $2.00, indicating growth of 173.9% from the year-ago reported figure. The company currently carries a Zacks Rank #2.

The Zacks Consensus Estimate for Omnicell’s first-quarter 2021 EPS is currently pegged at 67 cents, indicating growth of 1.5% from the year-ago reported figure. The same for revenues stands at $245.4 million, indicating growth of 6.8% from the year-ago reported figure. The company currently carries a Zacks Rank #2.

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Omnicell, Inc. (OMCL): 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.

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