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Critical Care removal prompts Wells Fargo to cut Edwards Lifesciences shares target

EditorEmilio Ghigini
Published 2024-09-09, 05:54 a/m
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On Monday, Wells Fargo (NYSE:WFC) adjusted its outlook on Edwards Lifesciences (NYSE:EW) shares, reducing the price target from the previous $90.00 to $80.00, while still maintaining an Overweight rating on the company.


The revision comes in light of changes to the firm's financial model, particularly the exclusion of the Critical Care unit from projections beginning in the third quarter of 2024.


The analyst noted that the Critical Care division was previously expected to contribute approximately $0.40 to the 2024 earnings per share (EPS) estimate.


As a result of the exclusion, the EPS forecasts for the third and fourth quarters of 2024 have been lowered by $0.10 each quarter to $0.57 and $0.63, respectively. This adjustment takes into account an estimated repurchase of approximately 14.5 million shares.


The full-year EPS estimate for 2024 has been revised downward to $2.56 from the earlier projection of $2.76. Looking ahead to 2025, the EPS forecast has been decreased to $2.55 from the previous estimate of $3.04.


Despite these reductions, the firm continues to anticipate a 9.1% organic core growth, excluding Critical Care, with a gross margin of 78.8% and an operating margin of 28.3%.


During Wells Fargo's Healthcare Conference, Edwards Lifesciences' management communicated that they expect the EPS for 2025 to be substantially lower than the forecast for 2024.


However, they also indicated that growth in core EPS, excluding Critical Care, would help to balance out the dilution from recent deals. Management had previously withdrawn their 2024 EPS guidance of $2.70 to $2.80 during the second-quarter call.


The analyst estimates that the EPS for 2025 could be around $2.55, taking into account the company's recent 3% reduction in headcount, which is expected to help mitigate the dilutive impact of recent acquisitions. Edwards Lifesciences views 2025 as a transitional year, expecting EPS growth to resume thereafter.


In other recent news, Edwards Lifesciences has been the center of various developments. The medical technology company reported a $95 million revenue beat, reaching total sales of $1.63 billion.


However, its Transcatheter Aortic Valve Replacement (TAVR) segment fell short of expectations, leading to a revised full-year TAVR growth guidance to 5-7%. This led several firms to adjust their outlooks.


Piper Sandler maintained a Neutral rating with a consistent price target of $73.00, while Citi revised its price target to $83.00. Wolfe Research upgraded the stock's rating to Peerperform, and Mizuho maintained its Outperform rating but reduced the price target to $85.


Edwards Lifesciences also announced the acquisitions of JenaValve and Endotronix, totaling approximately $1.1 billion in cash upfront. These acquisitions are seen as a strategic fit for the company, bringing potentially disruptive technologies to large markets that are currently underpenetrated.


The company is approaching the Transcatheter Cardiovascular Therapeutics (TCT) conference with optimism, as it offers a platform to showcase new data and developments in cardiovascular treatments.


In light of these recent developments, investors are keeping a close eye on Edwards Lifesciences, as it continues to navigate the complex healthcare landscape while focusing on innovation and market expansion.


InvestingPro Insights


Edwards Lifesciences (NYSE:EW) has been navigating a dynamic financial landscape, and real-time data from InvestingPro provides a deeper understanding of the company's current market position. With a market capitalization of $40.25 billion and a P/E ratio of 27.34, the company's valuation reflects its standing in the medical devices sector. Notably, the adjusted P/E ratio for the last twelve months as of Q2 2024 stands at 23.01, suggesting a slightly more favorable valuation when considering recent earnings.


InvestingPro Tips highlight that management's aggressive share buyback strategy could be a sign of confidence in the company's future prospects, while the company's ability to cover its interest payments from cash flows indicates financial stability. Additionally, Edwards Lifesciences operates with a moderate level of debt, which may afford the company some flexibility in its strategic decisions. It's worth noting that analysts predict profitability for the company this year, as evidenced by the last twelve months' performance.


Investors looking for growth indicators will find the 19.3% revenue growth over the last twelve months as of Q2 2024 encouraging, alongside a robust gross profit margin of 76.38%. These figures suggest that Edwards Lifesciences has been effectively managing its costs and maximizing its earnings potential. For those seeking further insights and analysis, InvestingPro offers additional tips for Edwards Lifesciences, accessible at https://www.investing.com/pro/EW.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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