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Edwards Lifesciences (EW) Down 5.9% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Edwards Lifesciences (EW). Shares have lost about 5.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Edwards Lifesciences due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Edwards Lifesciences Q1 Earnings Top Estimates, '23 View Up

Edwards Lifesciences delivered first-quarter 2023 adjusted earnings per share of 62 cents, beating the Zacks Consensus Estimate by 1.6%. The figure also increased 3.3% year over year.

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GAAP earnings per share was 56 cents in the quarter, down 5.1% year over year.

Sales Details

First-quarter net sales were $1.46 billion, up 8.8% year over year on a reported basis. The metric topped the Zacks Consensus Estimate by 4.7%.
Segmental Details

In the first quarter, global sales in the Transcatheter Aortic Valve Replacement (TAVR) product group amounted to $947.9 million, up 7.6% year over year. On an underlying basis, growth was 10.8%. In the United States, TAVR procedures increased in low-double digits year over year.

Transcatheter Mitral and Tricuspid Therapies sales totaled $41.6 million, up 53.6% from the prior-year quarter’s figure on a reported basis. On an underlying basis, the upside was 60.7%. The uptick can be attributed to the continued adoption of the PASCAL Precision system in Europe.

Surgical Structural Heart sales in the quarter totaled $248.2 million, up 12.4% from the year-ago quarter’s levels on a reported basis and 17% on an underlying basis. Growth was driven by the adoption of Edwards' premium products across all regions.  Additionally, overall strong valve surgery growth was higher than the company's expectations.

Critical Care sales totaled $221.9 million in the first quarter, up 4.6% from the year-ago quarter’s levels on a reported basis and up 9.2% on an underlying basis. Sales growth was led by the Smart Recovery technology portfolio and the strong adoption of the Acumen IQ sensor and finger cuff, featuring the company's unique Hypotension Prediction Index algorithm.

Margins

In the first quarter, gross profit was $1.13 billion, up 8.5%. The gross margin contracted 25 basis points (bps) to 77.4%.

The company-provided adjusted gross margin was 77.5%, a 30 basis-point contraction year over year. This year-over-year reduction was due to a less favorable impact from foreign exchange.

Selling, general and administrative expenses rose 17.8% year over year to $436.3 million. Research and development expenditures were $261.2 million, down 14.3% year over year.

During the reported quarter, operating income fell 2.3% year over year to $432.6 million. The operating margin contracted 339 bps to 29.6%.

Cash Position

Edwards Lifesciences exited first-quarter 2023 with cash and cash equivalents and short-term investments of $1.25 billion compared with $1.22 billion recorded at the end of fourth-quarter 2022. Long-term debt was $596.5 million at the end of first-quarter 2023 compared with $596.3 million at the end of fourth-quarter 2022.

Guidance

The company raised its guidance for full-year 2023.

The company expects full-year 2023 adjusted earnings per share to grow in the range of $2.48-$2.60 (compared with the previous guidance of $2.45-$2.60). The Zacks Consensus Estimate for the metric is pegged at $2.52.

Full-year 2023 sales are expected in the high range of $5.60-$6.00 billion, suggesting growth of 10-12% compared with the previous guidance of 9-12%. The Zacks Consensus Estimate for the same is pegged at $5.85 billion.

For the second quarter of 2023, Edwards Lifesciences projects total sales in the range of $1.48-$1.56 billion. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at 1.46 billion.

The adjusted earnings per share is expected in the band of 62-68 cents. The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 62 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Edwards Lifesciences has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Edwards Lifesciences has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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