Edwards Lifesciences Corp.EW recently presented a strategic framework revealing its financial outlook for 2016, which reflects the company’s long-term growth strategy and recent progress in its technology pipeline. The outlook, along with reaffirmation of 2015 financial guidance was revealed at Edwards’ annual investor conference, held in Irvine, CA.
For 2016, Edwards expects to deliver adjusted earnings per share (EPS) (excluding amortization expense and special items) in the range of $2.30–$2.40, or $4.60–$4.80 on a pre-stock split basis. With respect to the top line, the company expects to earn sales in the range of $2.50–$2.75 billion, representing underlying sales growth of 7–11%. This revenue guidance includes an estimated year-over-year unfavorable impact of foreign exchange rates worth $55 million.
The current 2016 Zacks Consensus Estimate of revenues is pegged at $2.5 billion , while the same for adjusted EPS is $4.76.
In addition, the company expects to deliver gross margin in the range of 74–75% and free cash flow in the band of $400–$440 million. It plans to continue its R&D investments at a cost that is approximately 16% of sales, excluding special items.
2015 Guidance
For 2015, Edwards had earlier announced its expectation to deliver adjusted EPS in the range of $4.43–$4.53 (excluding special items) on revenues of $2.3–$2.5 billion. The current 2015 Zacks Consensus Estimate of revenues is $2.3 billion , while the same for adjusted EPS is $4.49.
Segment-wise Outlook for 2016
In Transcatheter Heart Valve Therapy (THVT),the company expects to generate sales of $1.2 billion to $1.4 billion in 2016, representing 10–18% underlying growth, even as it faces tough competition. Moreover, Edwards continues to expect a late 2016 approval for its Sapien XT and Sapien 3 valves to treat intermediate risk patients in the U.S., with minimal contribution to sales in 2016. The company also plans to initiate the IDE trial next year for the Sapien 3 valve in low risk patients and expects to win marketing approval for its new Sapien 3 Ultra THV system overseas.
In Surgical Heart Valve Therapy, Edwards expects to generate sales of $780–$820 million in 2016, representing 3–6% underlying growth. Further, the company plans to launch its INTUITY Elite rapid deployment valve system in the U.S. during 2016. Edwards also expects to launch its new INSPIRIS valve platform in 2017, which utilizes its novel RESILIA tissue technology and VFit expansion feature.
In Critical Care, Edwards hopes to generate sales of $510–$550 million in 2016, with 2– 4% underlying growth. In this segment, the company expects to continue building upon its global leadership in hemodynamic monitoring by expanding the benefits of Enhanced Surgical Recovery (ESR) to a broader patient population through its ClearSight noninvasive platform during 2016.
In Structural Heart initiatives, Edwards expects to initiate a U.S. early feasibility study of its CardiAQ-Edwards transcatheter mitral valve replacement technology shortly. A CE Mark study is expected to begin in mid-2016.
Long-Term Outlook
Over the long term, Edwards expects to generate organic underlying sales growth at a meaningfully higher rate than the industry average. On the margin front, the company anticipates moderate expansion in gross margin due to an improving mix, partially offset by consistent investments in operations and new products.
The company now estimates the global TAVR opportunity to exceed $5 billion in 2021.
This apart, Edwards announced a structured investment in Harpoon Medical, Inc., a privately-held medical technology company that is pioneering a beating-heart, transcatheter therapy for minimally invasive surgical repair of degenerative mitral valves. The deal includes an exclusive option for Edwards to acquire the company.
The Road Ahead
With the global TAVR market expected to reach $3 billion by 2020, we believe the aforementioned outlook – both short and long-term – outlined by Edwards across its varied product categories and segments, will allow the company to fetch higher profits, going ahead. Notably, the company already enjoys one of the leading positions in the TAVR market.
Zacks Rank
Currently, Edwards carries a Zacks Rank #3 (Hold). Some better-ranked medical stocks are Natus Medical Inc. BABY, Masimo Corporation MASI and Olympus Corporation OCPNY. All the three stocks hold a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment