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Tickers in this Article: EW, MDT
Edwards Lifesciences Corporation (EW) is scheduled to release its first quarter fiscal 2011 results on Wednesday, April 20, 2011 after the market closes. The company is expected to earn 42 cents during the quarter on $385 million in revenues, according to the Zacks Consensus Estimate. As per Edwards' guidance (provided along with the fourth quarter results), adjusted EPS is expected in the range of 40-42 cents.

Previous Quarter Highlights

Edwards reported an adjusted EPS of 55 in the fourth quarter of fiscal 2010, beating the Zacks Consensus Estimate by 2 cents and the year-ago quarter's earnings of 42 cents. Revenues increased 13.2% year over year to reach $392.4 million during the quarter and exceeded the Zacks Consensus Estimate of $385 million.

Heart Valve Therapy remained the strongest segment at Edwards with an annualized growth of 20.1% to $226.2 million. Sales of surgical heart valves grew 5% to $160.9 million and transcatheter heart valves (THV) recorded an 87.2% growth to reach $65.3 million. The launch of Sapien XT valve in Europe primarily led to the growth of THVs while increased adoption of the Magna valve platform and Physio II rings led to the growth of surgical valves.

Agreement of Analysts

Estimate revision trends among the analysts have been insignificant in the last 30 days. Among 23 analysts covering the stock, none of them have revised their estimates for the first quarter. However, for fiscal 2011, 2 analysts have increased their estimates with 1 downward revision over the past 30 days.

Recently, Edwards had presented positive data for its Cohort A of the PARTNER trial at the American College of Cardiology annual conference in New Orleans. The PARTNER trial is evaluating Edwards' Sapien transcatheter heart valve (THV) in both operable (Cohort A) and inoperable (Cohort B) patients with severe aortic stenosis.

The company anticipates launching Sapien THV (for the treatment of inoperable patients) in the US during the fourth quarter of 2011 and expects sales of approximately $20-$25 million from Sapien.

The success of the Sapien portfolio in Europe is significant for the company. Moreover, the competitive landscape is quite tough with the presence of  Medtronic's (MDT) CoreValve.

Within Critical Care segment, we expect an update regarding the sales status of recently launched products such as VolumeView and EV1000. Although sales from these products were negligible during the last reported quarter, they have the potential to drive share gains going forward. The companyexpects to receive US approval for these products in the third quarter.

Magnitude

The magnitude of revisions has been modest following fourth quarter results. Overall, estimates for the first quarter have gone down by 2 cents to the current level of 42 cents per share in the last 90 days. For fiscal 2011, estimates have decreased by the same magnitude to the current level of $1.95 per share over the past 3 months.

Surprise

Continuously for the past four quarters, Edwards exceeded estimates with a positive four-quarter average of 3.57%. This indicates that on an average, the company has exceeded the Zacks Consensus Estimate by 3.57% over the last four quarters.

Our Recommendation

Edwards recorded strong revenue growth during the fourth quarter banking on robust performance by its Heart Valve Therapy products. Based on increased acceptance of its Sapien XT valves, the company's THV guidance for 2011 is encouraging.

Since investors are mounting their hopes on the development of the Sapien portfolio in the US, which is expected to be approved in 2011, any hiccup in the process will be a major dampener for the stock. Moreover, the company operates in a highly competitive environment with many big players targeting the THV segment.

We currently have a Neutral recommendation on Edwards which is also supported by the Zacks #3 Rank (Hold).

 
EDWARDS LIFESCI (EW): Free Stock Analysis Report
 
MEDTRONIC (MDT): Free Stock Analysis Report
 
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