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Edwards Lifesciences (EW) Q4 Earnings Top, Margins Increase

Edwards Lifesciences Corporation EW delivered fourth-quarter 2022 adjusted earnings per share (EPS) of 64 cents, beating the Zacks Consensus Estimate by 4.9%. The figure also increased 25.5% year over year.

Full-year adjusted EPS was $2.48, up 11.7% from the year-ago number. The metric surpassed the Zacks Consensus Estimate by 1.2%.

Our model projected an adjusted EPS of 58 cents for Q4 and $2.42 per share for 2022.

GAAP EPS was 65 cents in the quarter, up 22.6% year over year.

Full-year GAAP EPS was $2.44, reflecting a 2.5% rise from the year-earlier figure.

Our model projected a GAAP EPS of 58 cents for Q4 and $2.37 per share for full-year 2022.

Sales Details

Fourth-quarter net sales were $1.35 billion, up 1.4% year over year on a reported basis. The metric topped the Zacks Consensus Estimate by 1.3%.
The fourth-quarter revenue compares to our estimate of $1.34 billion.

Full-year revenues were $5.38 billion, reflecting a 2.9% increase from the year-ago period. However, revenues missed the Zacks Consensus Estimate by 0.4%.

Segmental Details

In the fourth quarter, global sales in the Transcatheter Aortic Valve Replacement (TAVR) product group amounted to $867.7 million, down 0.4% year-over-year. On an underlying basis, growth was 4.8%. In the United States, TAVR procedures increased in mid-single digits year over year.

Transcatheter Mitral and Tricuspid Therapies sales totaled $31.5 million, up 24.5% from the prior-year quarter’s figure on a reported basis. On an underlying basis, the upside was 36.2%. The upside can be attributed to the continued adoption of the PASCAL platform in Europe.

Surgical Structural Heart sales in the quarter totaled $224.1 million, up 1.3% from the year-ago quarter on a reported basis and 8.1% on an underlying basis.  The growth was backed by increased adoption of the company's premium RESILIA technologies worldwide, including the recent launch of the company's MITRIS surgical mitral valve.

Edwards Lifesciences Corporation Price and EPS Surprise

 

Edwards Lifesciences Corporation Price and EPS Surprise
Edwards Lifesciences Corporation Price and EPS Surprise

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

 

Critical Care sales totaled $225 million in the fourth quarter, up 6.3% from the year-ago quarter on a reported basis and up 13.4% on an underlying basis. Sales growth was driven by contributions from all product lines and regions, led by the HemoSphere platform and Smart Recovery technologies.

Margins

In the fourth quarter, gross profit was $1.09 billion, up 6.9%. The gross margin expanded 415 basis points (bps) to 80.9%.

Our model projected a gross margin of 80% for Q4.

The company-provided adjusted gross margin was 81%, a 420 basis-point expansion year over year. This increase was driven by the expected positive impact from the company's FX program, which includes hedge contract gains and natural hedges that offset the negative sales impact from the weakening of the Euro and Yen against the dollar.

Selling, general and administrative expenses fell 3.1% year over year to $411 million. Research and development expenditures were $232.2 million, down 0.3% year over year.

During the reported quarter, operating income rose 23.1% year over year to $447.2 million. The operating margin expanded 584 bps to 33.2%.

The adjusted operating margin, according to our model, was 31.3% for Q4.

Cash Position

Edwards Lifesciences exited 2022 with cash and cash equivalents and short-term investments of $1. 22 billion compared with $1.47 billion recorded at the end of 2021. Long-term debt was $596.3 million at the end of 2022 compared with $595.7 million at 2022.

Guidance

The company has reaffirmed its guidance for full-year 2023, as provided at the December investor conference.

The company expects full-year 2023 adjusted earnings per share to grow in the range of $2.45-$2.60. The Zacks Consensus Estimate for the metric is pegged at $2.49.

The full-year 2023 sales expectation was reiterated in the range of $5.60-$6.00 billion. The Zacks Consensus Estimate for the same is pegged at $5.77 billion.

For the first quarter of 2023, Edwards Lifesciences projects total sales in the range of $1.37 and $1.45 billion. The Zacks Consensus Estimate for the fourth-quarter revenues is pegged at 1.37 billion  

The adjusted EPS is expected in the band of 58 to 64 cents. The Zacks Consensus Estimate for the fourth-quarter earnings is pegged at 59 cents

Our Take

Edwards Lifesciences exited the fourth quarter of 2022 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 platform in Europe.  During the quarter, the company initiated the launch of PASCAL platform in the United States. Further, the growth within Surgical Structural Heart was lifted by increased adoption of the company's premium RESILIA technologies around the world, including the recent launch of the company's MITRIS surgical mitral valve. Moreover, the expansion of both margins is encouraging.

However, during the quarter, TAVR procedure volumes were impacted by the U.S. hospital staffing constraints and the holiday season slowdown. The choppy market conditions due to the continued foreign exchange impact and stiff competition within the medical device industry remain a concern.

Zacks Rank and Upcoming Releases

Edwards Lifesciences currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cardinal Health CAH, carrying a Zacks Rank of #2 will release fourth-quarter 2022 results on Feb 2.

Cardinal Health has a long-term expected earnings growth rate of 11.7%. Cardinal Health’s earnings yield of 6.87% compares favorably with the industry’s 4.34%.

AMN Healthcare Services, Inc. AMN, carrying a Zacks Rank #2 at present, will release third-quarter 2022 results on Feb 16.

It has an estimated long-term growth rate of 3.3%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 10.9%.

Laboratory Corporation of America Holdings or LabCorp LH, carrying a Zacks Rank of #2 will release fourth-quarter 2022 results on Feb 16.

LabCorp’s long-term historical earnings growth rate is estimated at 26.1%. LabCorp’s earnings yield of 7.02% compares favorably with the industry’s 4.34%.

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