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Edwards Lifesciences (EW) at a 52-Week High: What's Driving It?

Edwards Lifesciences Corporation EW scaled a new 52-week high of $118.18 on Aug 18, before closing the session marginally lower at $116.26. The stock has rallied 3.5% since its second-quarter earnings announcement on Jul 29.

The company is witnessing an upward trend in its stock price, prompted by strong sales growth across all four product groups, led by steady improvement in TAVR procedure volumes worldwide. Growing demand for the company’s products used in high-risk surgeries and recovery in the ClearSight non-invasive finger cuff in elective procedures are impressive. However, reimbursement cut and foreign exchange woes remain concerns.

Let’s delve deeper.

Key Growth Catalysts

Impressive Q2 Results: Edwards Lifesciences exited the second quarter of 2021 with better-than-expected results on post-pandemic business recovery. Strong sales growth across all four product groups, led by steady improvement in TAVR procedure volumes worldwide, buoys optimism. Robust adoption of the INSPIRIS aortic surgical valve and the KONECT aortic valve conduit is encouraging. Continued strong adoption of the SAPIEN 3 Ultra platform and the PASCAL system across Europe looks encouraging as well. Growing demand for the company’s products used in high-risk surgeries and recovery in the ClearSight non-invasive finger cuff in elective procedures are impressive.

Critical Care Business Holds Potential: The segment registered growth compared to the year-ago quarter, both on a reported and an underlying basis. The revenue uptick resulted from balanced contributions from all product lines, led by HemoSphere sales in the United States as hospital capital spending continues to rise.  In June 2021, the company received FDA clearance for the software algorithm that powers the Hypotension Prediction Index (HPI) on HemoSphere and the Acumen IQ cuff. The company expects full-year 2021 underlying sales growth in the low-double-digit range on the back of strength in demand for products used in more intense surgeries.

Image Source: Zacks Investment Research

Long-Term Growth Strategy Buoys Optimism: Edwards Lifesciences expects to maintain its leadership position in the global TAVR market through increased focus on expanding patient access by actively leveraging current valve platforms for additional indications. With patients and clinicians increasingly preferring TAVR and based on the substantial body of compelling clinical evidence along with strong adoption of its TAVR devices, management remains optimistic about the long-term growth opportunity its transcatheter therapies offer in the global market. Edwards Lifesciences is also committed to aggressively investing in structural heart disease and critical care technologies.

Upbeat Guidance: For the third quarter of 2021, Edwards Lifesciences expects adjusted earnings per share in the range of 50-56 cents. The company projects third-quarter 2021 sales revenues in the range of $1.29-$1.37 billion. For 2021, the company narrowed its projection of adjusted earnings per share to the high end of the previously-announced $2.07 to $2.27 range. For the year, the company raised its anticipation for sales to the range of $5.2-$5.4 billion from the previously-guided $4.9-$5.3 billion.


On the flip side, there are some factors deterring the stock’s rally of late.

Foreign Exchange Headwinds: The significant challenges Edwards Lifesciences had to face owing to unfavorable foreign currency impact have been affecting the company’s gross margin over the past few quarters. Per management, significant currency fluctuations could have a material effect on revenues, cost of sales and operational results.

Reimbursement Cut to Increase Expenses: The U.S. government's law related to the health care system includes provisions that, among other things, reduce or limit Medicare reimbursement, require all individuals to have health insurance (with limited exceptions) and impose increased taxes. This in turn puts pressure on companies’ cost structure in the medical sector.

Zacks Rank and Key Picks

Currently, the company carries a Zacks Rank #3 (Hold).

A few better-ranked stocks from the broader medical space are Envista Holdings Corporation NVST, BellRing Brands, Inc. BRBR and Henry Schein, Inc. HSIC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.

Envista Holdings has an estimated long-term earnings growth rate of 26%.

BellRing Brands has an estimated long-term earnings growth rate of 22%.

Henry Schein has a projected long-term earnings growth rate of 14%.

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