What's in Store for Edwards Lifesciences (EW) in Q2 Earnings?

Edwards Lifesciences Corporation EW is slated to report second-quarter 2020 results on Jul 23, after market close.

In the last reported quarter, the company posted an earnings surprise of 17.1%. Let's see how things are shaping up prior to this announcement.

Factors at Play

Critical Care

The second-quarter results are expected to reflect strength in the core Critical Care product group. The segment has been showing solid growth across all product categories and geographies over the last few quarters.

Management is optimistic about the robust customer adoption of the TruWave disposable pressure monitoring devices, especially in Europe, despite the challenging pandemic-led market conditions. This strength is likely to be reflected in the second-quarter results. Robust demand for Edwards Lifesciences’ ICU products is also likely to have boosted the top line.

Edwards Lifesciences Corporation Price


Edwards Lifesciences Corporation Price

Edwards Lifesciences Corporation price | Edwards Lifesciences Corporation Quote

However, reduced demand for the company’s enhanced surgical recovery products and delays in HemoSphere orders from hospitals in the United States are likely to have weighed on the top line.

For 2020, given the persistence of the COVID-19 related uncertainties, the company expects sales growth in Critical Care to remain flat year over year. The earlier provided expectation was 6-9%.

Meanwhile, the Zacks Consensus Estimate for the segment’s second-quarter revenues is pegged at $187 million, suggesting an increase of 1.6% from the year-ago quarter’s reported number.

Surgical Structural Heart

Within the Surgical Structural Heart Group, the company is expected to continue gaining from the strong adoption of its premium high-value technologies. Steady acceptance of the INSPIRIS RESILIA aortic valve across the globe is likely to reflect on second-quarter sales. However, it is to be noted here that the company might witness lower revenues at the segment due to a decline in procedures due to the pandemic. Further, headwinds in the U.S. surgical aortic valve procedures are likely to have persisted in second quarter due to the continued rapid adoption of Transcatheter Aortic Valve Replacement (TAVR).

Edwards Lifesciences projects a sales decline of 5-15% for 2020 at the segment due to pandemic-led business disruptions.

The Zacks Consensus Estimate for the segment’s second-quarter revenues is pegged at $139 million, implying a drop of 36.2% from the year-earlier quarter’s reported figure.

Other Factors at Play

Within the TAVR arm, the company is expected to have witnessed a fall in procedure volumes due to delays because of the pandemic. Nonetheless, the company’s top line is expected to have been benefited from the rollout of the SAPIEN 3 Ultra in the United States and Europe and favorable clinician feedback on improved paravalvular leak performance. However, new centers, which are not trained on the device, are currently out of the rollout purview. This might have impacted the company’s second quarter revenues.

Outside the United States, strong adoption of TAVR is likely to have contributed to the top line in the second quarter despite the pandemic. Notably, the SAPIEN 3 transcatheter heart valve was approved in China in June, which is likely to have witnessed strong customer adoption.

However, despite strength in the TAVR business, it is likely to have been severely impacted by the market challenges.

Edwards Lifesciences’ 2020 TAVR sales growth is projected to be flat year over year, compared to previous expectations of 15% growth.

The company’s Transcatheter Mitral and Tricuspid Therapies segment’s PASCAL transcatheter valve repair system registered strong momentum and saw accelerated adoption Europe in the first quarter of 2020. This is likely to have continued in the second quarter.

The Estimate Picture

The Zacks Consensus Estimate for second-quarter 2020 revenues is pegged at $769.1 million, suggesting a decline of 29.2% from the year-ago reported figure. The consensus mark for 2020 revenues is currently pegged at $4.24 billion.

What Our Model Suggests

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with an Earnings ESP has good chances of beating estimates. However, this is not the case here as you can see:

Zacks Rank: The company currently carries a Zacks Rank #3.

Earnings ESP: Edwards Lifesciences has an Earnings ESP of -152.66%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Worth a Look

Here are a few medical stocks worth considering as these have the right combination of elements to beat on earnings this reporting cycle.

Integra LifeSciences Holdings Corporation IART has an Earnings ESP of +20.69% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Exact Sciences Corporation EXAS has an Earnings ESP of +23.14% and a Zacks Rank of 2 at present.

Thermo Fisher Scientific Inc. TMO has an Earnings ESP of +14.37% and is a Zacks #1 Ranked stock.

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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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