Edwards Lifesciences EW is developing the most comprehensive structural heart disease portfolio post the sell-off of the Critical Care wing. The Surgical Structural Heart business is benefiting from the strong adoption of premium surgical technologies worldwide. In TMTT (Transcatheter Mitral Triscuspid Therapy) segment, the increasing global uptake of PASCAL and EVOQUE is highly encouraging. Meanwhile, a volatile macro economy and adverse currency impacts may dent Edwards’ growth.
In the past year, this Zacks Rank #3 (Hold) stock has lost 4.8% against the 7.1% rise of the industry and the 24.4% growth of the S&P 500 composite.
The renowned global medical device company has a market capitalization of $41.90 billion. EW’s earnings surpassed estimates in one of the trailing four quarters and matched on three occasions, with the average surprise being 0.78%.
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Let’s delve deeper.
Upsides for EW
Critical Care Divestment Fuels Structural Heart Opportunities: On Sept. 3, 2024, Edwards completed the sale of its Critical Care product group to Becton, Dickinson and Company for $4.2 billion in an all-cash transaction. Edwards expects this sell-off to enhance its balance sheet flexibility for disciplined investments in technologies for aortic, mitral, tricuspid and pulmonic patients, as well as new therapeutic areas for interventional heart failure. The company’s underlying rationale for separating Critical Care aligns with its vision to develop the most comprehensive structural heart disease portfolio. Through its differentiated innovations, Edwards aims to address the large unmet patient needs while extending its global leadership, delivering sustainable growth and increasing shareholder value.
Surgical Structural Heart, a Promising Business: The business pioneered the innovative RESILIA tissue, which is backed by more than 40 years of the company’s tissue technology leadership. In the third quarter of 2024, the segment’s growth was driven by strong global adoption of Edwards’ premium surgical technologies — INSPIRIS, MITRIS and KONECT. The company continues to see procedure growth globally for many patients treated surgically, including those undergoing complex procedures.
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Edwards has been expanding the overall body of RESILIA evidence and enrollment for the MOMENTIS clinical trial, studying the durability of RESILIA tissue in the mitral position. Within Heart Failure, the company has released strong 12-month results from its proactive heart failure (HF) pivotal trial, demonstrating significant benefits to patients managed with the Cordella system. As another major development, Edwards closed the acquisition of Endotronix in the third quarter, marking its entry into implantable heart failure management (IHFM).
TMTT Portfolio Holds Potential: Backed by the insights gained from clinical trials and real-world experiences, the company constructed a strategic portfolio of leading transcatheter technologies to provide both repair and replacement solutions for mitral and tricuspid patients. In the third quarter, the segment achieved a 73% increase from the prior year, driven by the PASCAL system and the continued introduction of the EVOQUE system in the United States and Europe.
PASCAL’s growing adoption underscores its premium differentiation and the value it delivers to both physicians and patients. Globally, mitral procedures are experiencing double-digit growth and even stronger growth in tricuspid therapy. Meanwhile, Edwards Lifesciences is making strides with the EVOQUE commercial rollout, having successfully activated new sites in both the United States and Europe (other than initial trial centers). During the third quarter, the company achieved approval in the United States for a fourth and larger size EVOQUE valve — 56 millimeters.
Concerns for Edwards
Macro Concerns Weigh on the Bottom Line: The global economy continues to experience volatility and disruptions, including inflation and factors influencing overall economic stability and the political environment relating to health care. Additionally, any significant increases in the cost of raw materials, supply constraints stemming from geopolitical complications, regulatory changes or otherwise, could weigh heavily on the company’s operating results. Post-pandemic, the business has been experiencing staffing shortages within the hospital systems and a surge in medical supply expenses, which is putting significant pressure on the margins of medical device companies like Edwards.
Foreign Exchange Headwinds: Foreign exchange is a major headwind for Edwards because a considerable percentage of its revenues come from outside the United States. The unfavorable currency fluctuations have adversely impacted the company’s gross margin over the past few quarters. Foreign exchange rates lowered third-quarter 2024 adjusted sales growth by 70 basis points, or $7.9 million, from a year ago.
EW’s Estimate Trend
The Zacks Consensus Estimate for Edwards’ 2024 earnings per share (EPS) has remained constant at $2.56 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $5.89 billion. This suggests a 1.8% fall from the year-ago reported number.
Top MedTech Picks
Some better-ranked stocks in the broader medical space are Veracyte VCYT, Haemonetics HAE and Phibro Animal Health PAHC.
Veracyte has estimated 2024 earnings growth rate of 137.3% compared with the industry’s 14.9%. Veracyte’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 520.6%. Its shares have risen 63% compared to the industry’s 7.1% growth in the past year.
VCYT sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Phibro Animal Health, carrying a Zacks Rank #2 (Buy) at present, has an estimated earnings growth rate of 36.1% for fiscal 2025 compared with the industry’s 11.9%. Shares of the company have risen 83% compared with the industry’s 9.3% growth over the past year. PAHC’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 25.47%.
Haemonetics, carrying a Zacks Rank #2 at present, has an estimated fiscal 2025 earnings growth rate of 15.9% compared with the industry’s 11.9%. Shares of the company have lost 9.1% against the industry’s 9.3% growth. HAE’s earnings surpassed estimates in three of the trailing four quarters and missed on one occasion, with the average surprise being 2.82%.
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