Analysts Shrug Off Softness In Edwards Lifesciences' Heart Value Replacement System

Edwards Lifesciences Corp EW reported Tuesday after the market close with above-consensus first-quarter results and raised its adjusted earnings per share guidance for the full year.

The Analysts

UBS analyst Matthew Taylor maintained a Neutral rating on Edwards with a $190 price target.
Canaccord Genuity analyst Jason Mills reiterated a Buy rating and $215 price target.
Raymond James analyst Jayson Bedford maintained an Outperform rating and lowered the price target from $210 to $200.

UBS: Valuation Is Relatively Full

Notwithstanding the beat on key metrics, transcatheter aortic valve replacement, or TAVR, sales of $598 million trailed the $607-million consensus estimate, with Edwards attributing the miss to slightly slower procedure growth globally, Taylor said in a Tuesday note.

The analyst said he expects some borderline low-risk patients to receive TAVR in the near-term following the FDA's approval. The S3 Ultra and Centrea launch in Europe have been slow, he said.

Although second-half contributions could be greater, UBS sees Edwards facing competition from Boston Scientific Corporation BSX and Abbott Laboratories ABT.

With the shares trading above their three-year average, Edwards' valuation is relatively full, Taylor said.

"To be more constructive, we would need conviction that low-risk indication reaccelerates TAVR market growth significantly, EW can hold competition at bay and its Pascal and other mitral products will drive upside."

Canaccord: We Will Accumulate Edwards In Large-Cap Portfolios

The first quarter is likely to represent a low water mark that could extend as far as 2021, Mills said in a Wednesday note. The low-risk approval for TAVR, which could come in the late second quarter, could accelerate growth for the market as well as for Edwards, he said.

The medical device maker lost modest share in Europe in the quarter, while it maintained share in the U.S, the analyst said.

The Centers for Medicare and Medicaid Services' national coverage analysis revision is an underappreciated, incremental catalyst for the company's TAVR growth, which could augment its position in the U.S. market, Mills said.

The company's TAVR global growth guidance of 11-15 percent, which represents a strong acceleration off first-quarter levels, is achievable, the analyst said.

Canaccord said it will accumulate Edwards in large-cap portfolios, given the TAVR growth acceleration; long-term underpenetrated total addressable market; forward earnings leverage that provides scope for above-consensus EPS in 2019-2021; and more impactful and earlier-than-expected mitral/tricuspid opportunities.

Raymond James Sees An Accelerating Large-Cap Medtech Growth Story

The acceleration in organic growth implied in Edwards' guidance seems achievable, Bedford said in a Wednesday note.

"Edwards has several new products (PASCAL, S3 Ultra, Centera) and TAM expansion (low risk-LR approval expected in late 2019) that provide visibility into accelerating growth over the next few quarters," the analyst said.

Edwards should continue to be one of the better accelerating growth stories in large-cap med tech, according to Raymond James.