On Thursday, BofA Securities adjusted its stance on shares of Edwards Lifesciences (NYSE:EW), downgrading the stock from Buy to Neutral and reducing the price target to $75 from the previous $105.
This decision follows Edwards Lifesciences' failure to meet its projected growth, with two consecutive quarters of missed Transcatheter Aortic Valve Replacement (TAVR) sales and a lowered TAVR outlook for 2024. The company's revised TAVR growth guidance now stands at 5-7%, a drop from the 8-10% previously forecasted.
The analyst from BofA Securities indicated that the downgrade reflects a shift in perspective, citing that the path to sustained double-digit revenue growth for Edwards Lifesciences seems uncertain, even with optimistic projections for mitral and tricuspid valve treatments. This reassessment comes in light of the company's recent performance and adjustments to its financial outlook.
Edwards Lifesciences is also experiencing earnings per share (EPS) dilution within its critical care segment and has engaged in four deals using about half of its proceeds, which are viewed as dilutive. With the lack of clear projections for 2025 EPS until December and uncertainties surrounding the long-term growth rate of TAVR, the firm anticipates that outperforming the stock market may pose a challenge.
The revised price objective is based on a recalibrated model, now estimating a 2025 EPS of $2.65 and a 2026 EPS of $3.00. The valuation multiple has been adjusted to 25 times the 2026 EPS, a reduction from the 35 times 2025 EPS used previously. This change in valuation reflects the analyst's view on the company's growth prospects and the decision to extend the price objective timeline to 2026.
In other recent news, Edwards Lifesciences has seen several adjustments in its stock target by various firms following its recent financial results. The company reported a $95 million revenue beat, with total sales reaching $1.63 billion.
Still, its core Transcatheter Aortic Valve Replacement (TAVR) segment underperformed expectations, leading to lowered growth guidance. Mizuho, Oppenheimer, TD Cowen, Piper Sandler, and RBC Capital Markets all adjusted their price targets for Edwards Lifesciences due to these developments.
Despite the slower TAVR performance, the company's Transcatheter Mitral and Tricuspid Therapies (TMTT) segment outperformed expectations, driving an 8% increase in total sales for Q2. Moreover, Edwards Lifesciences announced acquisitions totaling $1.2 billion, including JenaValve and Endotronix. These recent developments reflect the company's ongoing efforts to navigate the complex healthcare landscape while focusing on innovation and market expansion.
InvestingPro Insights
Edwards Lifesciences (NYSE:EW) is currently navigating a period of recalibration, as reflected by the recent market data. With a market capitalization of $52.4 billion, the company is trading at a high earnings multiple of 37.21, which is adjusted to 32.15 when considering the last twelve months as of Q1 2024.
Despite the downgrade by BofA Securities, Edwards Lifesciences has demonstrated a solid financial foundation, with a gross profit margin of 76.63% over the same period, and operating income margins standing at 28.84%. These metrics underscore the company's ability to maintain profitability, even amidst the challenges faced in its TAVR segment.
InvestingPro Tips suggest that Edwards Lifesciences operates with a moderate level of debt and its cash flows can sufficiently cover interest payments, indicating financial stability. Moreover, the company's liquid assets exceed its short-term obligations, providing it with the flexibility to navigate through the current market uncertainties. Analysts predict that the company will remain profitable this year, a sentiment supported by its positive return on assets of 15.34% in the last twelve months as of Q1 2024.
For investors seeking a more in-depth analysis and additional tips, there are 10 more valuable InvestingPro Tips available, which can be accessed for Edwards Lifesciences at https://www.investing.com/pro/EW. To enhance your investment strategy, consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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