On Wednesday, Citi upgraded shares of Edwards Lifesciences (NYSE:EW) from Neutral to Buy, with an increased price target of $105.00, up from the previous $98.00. The decision follows a review of the company's first-quarter performance in 2024, where Transcatheter Aortic Valve Replacement (TAVR) revenue showed a growth of 6.6% excluding foreign exchange effects, or 7.7% when adjusted for days.
Additionally, Transcatheter Mitral and Tricuspid Therapies (TMTT) revenue surged by 72.2% from a lower base, prompting management to raise its segment guidance to $320-$340 million, up from the previous range of $280-$320 million.
Despite a year-to-date run, Edwards Lifesciences' stock dipped by 2% on the day of the earnings report. Citi's analysis suggests potential stabilization of TAVR growth in the high-single digits and an acceleration of TMTT, which could lead to high-single to low-double digit revenue growth for the company. The upcoming spin-off of the Critical Care franchise and positioning ahead of the Transcatheter Cardiovascular Therapeutics (TCT) conference, scheduled for October 27-30, where full data sets for Evoque and EARLY TAVR will be presented, are also factors that could influence the stock's performance.
Citi bases the upgraded rating and price target on several factors, including a 30-31 times multiple on the estimated 2025 earnings per share (EPS), increased from the previous 29-30 times, as the TAVR business shows signs of stabilization and TMTT gains momentum. Furthermore, a sum-of-the-parts (SOTP) analysis supports a valuation range of $98-$108. The firm's outlook for Edwards Lifesciences is positive, anticipating the company to perform well into the end of the year with a reset base business and optimism for the next growth phase.
InvestingPro Insights
Edwards Lifesciences (NYSE:EW) continues to demonstrate financial resilience and growth potential as evidenced by recent real-time data from InvestingPro. With a market cap of $54.44 billion and a trailing twelve-month revenue of $6.143 billion, up 11.68%, the company shows a robust financial position. The revenue growth aligns with Citi's positive outlook on the company's TAVR and TMTT segments. Additionally, the stock's price to earnings (P/E) ratio stands at 33.4, reflecting a premium valuation that may be justified by its growth prospects and a high gross profit margin of 76.63% for the last twelve months as of Q1 2024.
InvestingPro Tips highlight that Edwards Lifesciences operates with a moderate level of debt and has liquid assets that exceed short-term obligations, suggesting a strong balance sheet. The company's cash flows are also capable of sufficiently covering interest payments, indicating financial stability. This information is particularly relevant for investors considering Citi's recent upgrade to Buy. It's noteworthy that the stock has experienced a significant price uptick of 34.72% over the last six months, signaling strong investor confidence which may continue following the TCT conference presentations.
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