Omicron Weighs On Edwards Lifesciences In The Fourth Quarter — So, What's Next?

The omicron variant weighed on Edwards Lifesciences (EW) in late 2021, leading to a fourth-quarter miss and pushing EW stock into a tumble Thursday.


Further, Edwards issued lighter-than-expected guidance for the first quarter and 2022 earnings.

The company makes devices to correct heart problems. But elective procedures at hospitals tend to decline with Covid surges. Omicron "had a pronounced impact on hospital resources in December," Edwards Chief Executive Michael Mussallem said in a written statement.

He remained upbeat and noted sales climbed by double digits in the fourth quarter. But EW stock toppled 6.1% to 101.96 on the stock market today.

EW Stock: Omicron Weighs On TAVR

During the fourth quarter, sales grew 12% to $1.33 billion. But that narrowly missed expectations for $1.35 billion. Adjusted profit climbed by a penny year over year to 51 cents per share. But that missed analyst forecasts by 4 cents, according to FactSet.

Edwards' most important business remains its transcatheter aortic heart-valve replacements, also known as TAVR. TAVR is a nonsurgical method of replacing a faulty heart valve. Sales climbed 12% to $872 million. But that segment lagged forecasts by $18 million due to soft U.S. hospital trends, BTIG analyst Marie Thibault said in a report to clients.

Omicron Weighs On Edwards Lifesciences In The Fourth Quarter — So, What's Next?

"As with the third-quarter miss, Covid hospitalizations pressured U.S. TAVR procedure volumes, this time as omicron emerged late in the quarter," she said. She kept her neutral rating on EW stock.

Outside the U.S., TAVR sales popped 20% amid strong international adoption of the procedure. But that implies just 9% TAVR growth in the U.S., Evercore ISI analyst Vijay Kumar said in his note to clients.

Sales of its smaller transcatheter mitral and tricuspid therapies division were $25 million. Edwards expects that business to bring in $86 million this year and for the global opportunity to reach $5 billion by 2028. Meanwhile, its surgical business generated $221 million, up 8%.

Other Medical Stocks Hit

Edwards reiterated its 2022 outlook for $5.5 billion to $6 billion in sales. It also guided to adjusted profit of $2.50-$2.65 per share.

For the first quarter, the medical technology giant expects $1.27 billion to $1.35 billion in sales and adjusted earnings of 54-62 cents per share. Both measures came up light.

"We view this as a prudent approach as omicron and staffing shortages remain key concerns for U.S. hospitals," BTIG's Thibault said. "Commentary pointed to an anticipated improvement following this spike, though management shied away from blessing a 'rebound' in TAVR volumes similar to that seen in the second quarter of 2021."

Evercore's Kumar noted the results shouldn't be a surprise after Intuitive Surgical (ISRG) and Abbott Laboratories (ABT) also reported soft growth in the U.S. He sees the first-quarter guidance as "reasonable and de-risked." He kept his outperform rating and 130 price target on EW stock.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.


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