What’s in Store for Edwards Lifesciences’ (EW) Q3 Earnings?

Edwards Lifesciences Corporation EW is slated to report third-quarter 2020 results on Oct 21, after market close.

In the last reported quarter, the company posted an earnings surprise of 126.67%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Critical Care

The third-quarter results are expected to reflect a mixed performance by the core Critical Care product group. The pandemic has continued to impact the procedural volumes in the segment, as elective procedures have been deferred. Global demand has been soft due to the pandemic-led business disruptions over the past few months.

However, management is optimistic about the robust customer adoption of the TruWave disposable pressure monitoring devices, despite the challenging pandemic-led market conditions. This is likely to be reflected in the third-quarter results. Robust demand for Edwards Lifesciences’ ICU products is also likely to have boosted the top line.

However, a decline in HemoSphere orders from hospitals in the United States is likely to have weighed on the top line. Management is also worried about the continued lower demand for products used in more elective surgeries, which might have outweighed the recovery in products used for cardiac surgeries observed toward the end of the second quarter.

For 2020, given the persistence of the COVID-19-related uncertainties, the company earlier expected sales in Critical Care to decline from 2019.

Meanwhile, the Zacks Consensus Estimate for the segment’s third-quarter revenues is pegged at $178 million, suggesting a decrease of 1.1% from the year-ago quarter’s reported number.

Surgical Structural Heart

Within the Surgical Structural Heart Group, the company is expected to continue being adversely impacted by the ongoing pandemic-led business disruptions. Further, headwinds in the U.S. surgical aortic valve procedures are likely to have persisted in the third quarter due to the continued rapid adoption of Transcatheter Aortic Valve Replacement (TAVR).

Edwards Lifesciences Corporation Price and EPS Surprise

Edwards Lifesciences Corporation Price and EPS Surprise

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

On a positive note, Edwards Lifesciences is optimistic about the recovery of procedure demand, increased and improved management of ICU capacity and the prioritization of heart surgery in many hospitals observed toward the latter part of the second quarter. This trend is likely to have continued through the third quarter as well and contributed to the top line.

Robust acceptance of the INSPIRIS RESILIA aortic valve across the globe, especially in the United States and Japan, is likely to reflect on third-quarter sales. The FDA-approved KONECT RESILIA aortic valve conduit is also expected to have contributed to the third quarter’s top line. Further, the robust performance of the HARPOON mitral valve repair system in Europe is also expected to have continued in the third quarter.

Meanwhile, management is optimistic about the recovery observed in the segment toward the latter part of the second quarter and expects it to have extended in the United States and Europe during the third quarter.

Edwards Lifesciences projects a sales decline of 5-15% for 2020 in the segment due to pandemic-led business disruptions.

The Zacks Consensus Estimate for the segment’s second-quarter revenues is pegged at $200 million, implying a drop of 1.9% from the year-earlier quarter’s reported figure.

Other Factors at Play

Within the TAVR arm, the company is expected to have continued to witness a fall in procedure volumes due to delays caused by the pandemic. However, the steady improvement in procedure volumes during the latter half of the second quarter is likely to have continued in the third quarter, thus boosting revenues.

Nonetheless, the company’s top line is expected to have benefited from the favorable clinician feedback on improved paravalvular leak performance of the SAPIEN 3 Ultra.

Outside the United States, the strong adoption of TAVR is likely to have contributed to the top line in the third quarter despite pandemic-related challenges. Notably, the SAPIEN 3 transcatheter heart valve was approved in China in June, which is likely to have witnessed strong customer adoption.

However, despite strength in the TAVR business, the company is likely to have been severely affected by market challenges.

Edwards Lifesciences’ 2020 TAVR sales growth is projected to be flat year over year.

The company’s Transcatheter Mitral and Tricuspid Therapies segment’s PASCAL transcatheter valve repair system is likely to have continued its strong momentum in the third quarter of 2020. Notably, during the second quarter, the company confirmed to have early commercial sales in Europe with several of the repair therapies with PASCAL and Cardioband as well as replacement therapies with M3 and EVOQUE. This is likely to have continued in the third quarter as well.

The Estimate Picture

The Zacks Consensus Estimate for third-quarter 2020 revenues is pegged at $1.08 billion, suggesting a decline of 1.2% from the year-ago quarter’s reported figure.

The Zacks Consensus Estimate for third-quarter 2020 earnings is pegged at 45 cents, indicating a decline of 4.3% from the year-ago quarter’s reported figure.

What Our Model Suggests

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has higher chances of beating estimates. However, this is not the case here as you can see:

Zacks Rank: The company currently carries a Zacks Rank #3.

Earnings ESP: Edwards Lifesciences has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Worth a Look

Here are a few medical stocks worth considering as these have the right combination of elements to beat on earnings this reporting cycle.

Abbott Laboratories ABT has an Earnings ESP of +5.30% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

IDEXX Laboratories, Inc. IDXX has an Earnings ESP of +1.42% and a Zacks Rank of 2, at present.

DaVita Inc. DVA has an Earnings ESP of +2.89% and is a Zacks #1 Ranked stock.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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