Can Edwards Lifesciences (EW) Surprise Q2 Earnings Estimates?

Edwards Lifesciences Corp. (EW) is set to report its second-quarter 2014 earnings results on Jul 29. Last quarter, the company had posted an 11.8% positive surprise. Let’s see how things are shaping up for this announcement.

Factors at Play

With continuous expansion of the Transcatheter Aortic Valve Replacement (TAVR) market, management remains confident about the company’s long-term growth potential in this market on the back of its firm competitive position and innovative new technologies.

In the previous quarter, Edwards Lifesciences had commenced the European launch of its integrated, non-invasive monitoring technology – ClearSight. Management is confident that a number of hospitals, which are currently in search for such a non-invasive technology to monitor its large number of patients, will serve as potential buyers of this ClearSight technology and thus, contribute to its sales volumes. The company expects to launch this innovative technology in the U.S. in the upcoming quarter as well to gain further traction.

During the first quarter of 2014, the first 3 human implants of Edwards Lifesciences’ FORTIS mitral transcatheter heart valve were performed successfully. At present, physicians are treating additional patients and positive clinical results are expected from these transplantations as well. Moreover, the company believes that as the mitral valve disease remains under-treated globally, this FORTIS valve implant will cater to more number of patients, who are at high risk to undergo traditional surgery.

For the second quarter, Edwards Lifesciences expects total sales in the range of $525–$565 million and adjusted EPS in the range of 71–81 cents. The Zacks Consensus Estimate of $546 million for revenue lies within the company guided range. The current Zacks Consensus Estimate of 79 cents for EPS also lies within the guided range.

Earnings Whispers

Our proven model does not conclusively show that Edwards Lifeciences is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Edwards Lifesciences has a negative Zacks ESP. That is because the Most Accurate estimate stands at 75 cents while the Zacks Consensus Estimate is pegged higher at 77 cents. That leads to a difference of -2.60%.

Zacks Rank: Edwards Lifesciences’ Zacks Rank #3 (Hold) when combined with a -2.60% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Amsurg Corp. (AMSG), earnings ESP of +3.13% and a Zacks Rank #2 (Buy).

Sirona Dental Systems Inc. (SIRO), earnings ESP of +1.04% and a Zacks Rank #2.

Myriad Genetics Inc. (MYGN), earnings ESP of +4.35% and Zacks Rank #3.