On Thursday, Edwards Lifesciences (NYSE:EW) experienced a change in its stock rating as Truist Securities shifted its view from Buy to Hold. The firm also adjusted the price target for the company's shares, bringing it down to $82 from the previous target of $110. The revision reflects concerns over the company's revenue growth and earnings per share (EPS) prospects for the years 2024 and 2025.
The reassessment by Truist Securities is based on a more cautious outlook for the transcatheter aortic valve replacement (TAVR) market, which is expected to see a slowdown and may require time to reaccelerate. Additionally, the analyst notes potential dilution effects on earnings in 2025 stemming from two recent acquisitions made by Edwards Lifesciences.
Despite the downgrade, Truist Securities acknowledges the potential for long-term growth in the transcatheter mitral and tricuspid therapies (TMTT) market and the possibility of expanding indications for TAVR.
However, the anticipated revenue acceleration between the second half of 2024 and 2025 seems to have hit a setback, leading to a more conservative stance on the stock.
The analyst expressed hesitancy in recommending Edwards Lifesciences based solely on the potential for multiple expansion, especially given the tempered expectations for TAVR growth, which is now projected to be in the mid-single digits range. This outlook is compounded by the lack of confidence in revenue and EPS upside that could offset the expected EPS impact from the critical care sale.
In summary, the updated view from Truist Securities suggests a more guarded outlook for Edwards Lifesciences as it grapples with market dynamics and recent business activities. The lowered price target and rating downgrade reflect these challenges and a recalibration of expectations for the medical device company's financial performance in the near term.
In other recent news, Edwards Lifesciences has experienced significant developments in its business operations and strategic planning. The company's Transcatheter Aortic Valve Replacement (TAVR) sales figures fell short of market expectations, leading JPMorgan (NYSE:JPM) to downgrade its rating from Overweight to Neutral.
Despite the TAVR sales shortfall, the company completed acquisitions of JenaValve and Endotronix. Edwards Lifesciences also announced plans to sell its Critical Care business to Becton, Dickinson, and Company for $4.2 billion and acquire Innovalve Bio Medical for around $300 million.
Furthermore, the company confirmed that its SAPIEN M3 device is on track for European approval by 2025. However, the release of Acurate US IDE trial results has been delayed to March 2025, suggesting a postponement in the US approval and launch of Acurate, now anticipated in the second half of 2025. TD Cowen reaffirmed its Buy rating for Edwards Lifesciences despite the delay, while Truist Securities and Citi upgraded their price targets, citing consistent double-digit growth and expansion opportunities. BTIG maintained a Neutral rating on Edwards Lifesciences shares, even after the company's strategic move to acquire Innovalve Bio Medical.
Finally, Edwards Lifesciences announced that its Senior Vice President and Principal Accounting Officer, Robert W.A. Sellers, will retire in 2024, with Andrew M. Dahl succeeding him. These recent developments highlight the ongoing evolution of Edwards Lifesciences' business operations and market position.
InvestingPro Insights
In light of Truist Securities' recent reassessment of Edwards Lifesciences (NYSE:EW), current InvestingPro data and tips provide additional context for investors. With a market capitalization of $52.4 billion and a robust gross profit margin of 76.63% for the last twelve months as of Q1 2024, Edwards Lifesciences demonstrates a strong ability to retain earnings relative to its revenue. The company's P/E ratio stands at 37.21, which, while high, is adjusted to a slightly lower 32.15 for the same period, indicating a premium valuation for its earnings.
InvestingPro Tips suggest that Edwards Lifesciences operates with a moderate level of debt and has liquid assets that exceed its short-term obligations, which may reassure investors of the company's financial health. Moreover, the company's cash flows can sufficiently cover interest payments, a positive sign of financial stability. It's also worth noting that analysts predict the company will be profitable this year, and it has been profitable over the last twelve months, aligning with the long-term growth acknowledged by Truist Securities.
For investors seeking a deeper analysis, there are additional InvestingPro Tips available, which could further inform investment decisions. To explore these insights, consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. This could unlock valuable information such as the company's performance metrics and analyst projections, which currently list Edwards Lifesciences as trading at a high EBITDA valuation multiple and a high Price / Book multiple.
The current InvestingPro Fair Value estimate stands at $85.4, which is slightly below the previous closing price of $86.95 but above the revised price target set by Truist Securities. With the next earnings date approaching on October 23, 2024, investors will be keen to assess how the company's financials align with market expectations and analyst forecasts.
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