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Edwards Lifesciences (EW) Q1 Earnings Top Estimates, '23 View Up

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

GAAP EPS 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.

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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.

Edwards Lifesciences Corporation Price, Consensus and EPS Surprise

 

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

 

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

Our Take

Edwards Lifesciences exited the first quarter of 2023 on a bullish note with better-than-expected earnings and revenues. The company also registered year-over-year growth on both fronts. The company’s TMTT segment registered strong growth, driven by the continued adoption of the PASCAL Precision system in Europe. During the quarter, the company completed enrolment of the TRISCEND II pivotal trial for the EVOQUE Tricuspid Valve Replacement System. Further, growth within Surgical Structural Heart was lifted by the increased adoption of Edwards' premium products across all regions. The company raised its full-year 2023 guidance, which is encouraging too.

However, the contraction of both margins is discouraging. The choppy market conditions due to the persistent foreign exchange impact and stiff competition within the medical device industry is a concern.

Zacks Rank and Upcoming Releases

Edwards Lifesciences currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader medical space are Bio-Rad Laboratories BIO, Henry Schein, Inc. HSIC and Avanos Medical, Inc. AVNS.

Bio-Rad Laboratories, carrying a Zacks Rank of 2, is expected to release first-quarter 2023 earnings on May 4. BIO has an earnings yield of 3.3%, which compares favorably with the industry’s negative yield of 2.9%.

BioRad Laboratories’ earnings surpassed estimates in three of the trailing four quarters and missed the same once, the average surprise being 27.54%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Henry Schein, carrying a Zacks Rank #2, is expected to release first-quarter 2023 earnings on May 2. HSIC has an estimated long-term growth rate of 8.1%. HSIC’s earnings surpassed estimates in three of the trailing four quarters and matched the same in the other, the average beat being 2.9%.

Henry Schein has gained 22.2% compared with the industry’s 19.7% rise in the past six months.

Avanos, carrying a Zacks Rank #2, is expected to release first quarter 2023 earnings on May 3. AVNS has an estimated growth rate of 1.8% for 2023. AVNS’ earnings surpassed estimates in all the trailing four quarters, the average beat being 11%.

Avanos has gained 46.3% compared with the industry’s 17.5% rise in the past six months.

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