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Edwards Lifesciences Beats Q1 Estimates but Predicts an Ugly Q2

By Keith Speights – Updated Apr 24, 2020 at 7:40AM

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The COVID-19 outbreak took a heavy toll on the company's sales at the end of Q1. And the problems will likely get worse before they get better.

Like nearly every stock, Edwards Lifesciences (EW -0.28%) tanked during the coronavirus-driven stock market sell-off in late February and March. But its shares have bounced back more robustly than most stocks. 

The healthcare company announced its first-quarter results after the market closed on Thursday. Here are the highlights from Edwards' Q1 update.

Physician's hand holding a 3D image heart

Image source: Getty Images.

By the numbers

Edwards Lifesciences reported revenue in the first quarter of $1.1 billion, a 14% year-over-year increase. This result topped the average analyst estimate of $1.08 billion.

The company announced Q1 net income of $310.6 million, or $1.47 per share, based on generally accepted accounting principles (GAAP). In the prior-year period, Edwards posted GAAP net income of $249.7 million, or $1.18 per share.

Edwards' adjusted net income for the first quarter came in at $1.51 per share. This reflected a 14% jump from the prior-year period and easily beat the consensus Wall Street adjusted earnings estimate of $1.33 per share.

Behind the numbers

Although Edwards Lifesciences beat both top- and bottom-line estimates, the company said that its sales slipped significantly in the last few weeks of the first quarter because of the impact of the COVID-19 outbreak. This effect occurred across the board with the company's transcatheter aortic valve replacement (TAVR) devices, its transcatheter mitral and tricuspid therapies (TMTT), and its surgical structural heart and critical-care products.

Still, Edwards enjoyed solid growth on several fronts. TAVR sales in Q1 jumped 24% year over year to $742 million. The company reported TMTT sales of $10 million, with tremendous momentum for its PASCAL mitral valve system in Europe. 

The main bad news for Edwards (other than the impact of COVID-19) came from its surgical structural heart business. Sales for the unit dropped 10% year over year to $193 million. However, one key factor behind this decline was the increased adoption of TAVR devices.

One area of Edwards' business actually benefited from the COVID-19 pandemic. Sales of critical-care products rose 4% from the prior-year period. Intensive-care units (ICUs) in hospitals stocked up on the company's disposable pressure-monitoring devices for use in managing the care of COVID-19 patients. 

Looking ahead

With the writing on the wall at the end of the first quarter, it's not surprising that Edwards Lifesciences lowered its full-year 2020 guidance. The company now projects sales will be between $4 billion and $5 billion. The lower end of this range reflects a downward revision from the previous outlook of $4.6 billion. Edwards also expects full-year non-GAAP earnings per share (EPS) will be between $4.75 and $5.25, down from its previous guidance of $6.15 to $6.40. 

It's likely that the worst could be felt in the second quarter. Edwards anticipates Q2 sales of between $700 million and $900 million, well below its first-quarter result. However, the company hopes to have a gradual recovery in the third and fourth quarters.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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