Market Overview - There has been a significant tone shift in markets so far in 2025, with technology and discretionary sectors lagging behind [1] - Last year's underperforming areas, including Health Care and Energy sectors, have seen increased interest and investment [1] Sector Performance - The Health Care Select Sector SPDR Fund ETF has caught a bid, indicating a positive shift in investor sentiment towards the health care sector [1]

Sales Performance - Sales of TAVR products represented 75%, 77%, and 79% of net sales in 2024, 2023, and 2022, respectively[25]. - Sales of surgical tissue heart valve products accounted for 18%, 19%, and 19% of net sales in 2024, 2023, and 2022, respectively[28]. - In 2024, 59% of net sales were derived from customers in the United States, while 41% came from international markets[35][36]. - Total net sales for 2024 reached $5,439.5 million, an increase of $429.5 million or 8.6% compared to 2023[162]. - Net sales in the United States were $3,206.0 million, up $258.1 million or 8.8% from $2,947.9 million in 2023[162]. - Sales of Transcatheter Aortic Valve Replacement products increased to $4,106.1 million, a rise of $226.3 million or 5.8% from $3,879.8 million in 2023[163]. - The Transcatheter Mitral and Tricuspid Therapies segment saw a significant increase of 78.2%, with sales rising to $352.1 million from $197.6 million[163]. Research and Development - Research and development spending increased by 9% year over year, representing 19% of 2024 sales, primarily due to investments in transcatheter structural heart programs[45]. - The company is developing new products to improve transcatheter aortic heart valve replacement procedures and investing in technologies for mitral and tricuspid valve diseases[47]. - Research and development activities are primarily conducted in the United States and Israel, with collaborations with leading research institutions and clinicians globally[53]. - The company focuses on developing medical technologies for cardiovascular disease treatment, including bioprosthetic surgical tissue heart valves and transcatheter valves[52]. - The company completed patient enrollment in the PROGRESS pivotal trial for moderate AS patients and received CE Mark approval for the Edwards SAPIEN 3 Ultra RESILIA valve in Europe[167]. - Research and Development (R&D) expenses increased as the company continued to invest in aortic transcatheter valve innovations and clinical trial activities[177]. Regulatory and Compliance - Compliance with FDA regulations is resource-intensive, and several products are pending regulatory clearance or approval[60]. - The EU's Medical Device Regulation (MDR) implemented in May 2021 requires re-certification of many products, leading to substantial additional expenses[66]. - The company is subject to various laws and regulations, including anti-kickback laws and the Stark law, which could impact its operations[62]. - The regulatory approval process for new products requires extensive clinical trials, and unfavorable clinical data could adversely impact the company's market prospects[95]. - The company is subject to rigorous governmental regulations, which may incur significant compliance costs and impact business operations if not adhered to[124]. Financial Performance - Gross profit increased in 2024, although the gross profit margin decreased by 0.6 percentage points due to foreign currency fluctuations[174]. - Selling, General, and Administrative (SG&A) expenses rose due to higher personnel-related costs and expenses related to recent business combinations[176]. - Interest income increased to $120.3 million in 2024 from $67.2 million in 2023, driven by a higher average investment balance and yield[186]. - Other non-operating income rose to $68.9 million in 2024, up from $13.9 million in 2023, mainly due to gains from the remeasurement of previously held equity interests[187]. - The effective income tax rate decreased to 9.8% in 2024 from 11.1% in 2023, attributed to increased tax benefits from foreign earnings and favorable audit settlements[188]. - Net cash flows from operating activities decreased by $353.5 million to $542.3 million in 2024, primarily due to tax payments of $1.2 billion[216]. - Net cash provided by investing activities was $2.3 billion in 2024, mainly from the sale of Critical Care, offset by $1.1 billion for acquisitions and $252.4 million in capital expenditures[217]. - Net cash used in financing activities was $983 million in 2024, primarily due to treasury stock purchases of $1.2 billion[219]. Employee and Culture - The talent management strategy aims to attract and retain a motivated workforce aligned with the company's patient-focused innovation strategy[77]. - The company is committed to maintaining an ethical culture, promoting diversity, and ensuring fair compensation practices across all operating regions[83]. - As of December 31, 2024, the company had approximately 15,800 employees worldwide, with the majority located in the United States, Singapore, and Costa Rica[88]. - The company emphasizes a patient-focused culture and aims to foster inclusion and collaboration among employees to drive innovation[84]. - The company conducts a multilingual global employee survey, myVoice, to gather feedback on various topics, including patient focus and diversity, which is reviewed by management and the Board of Directors[85]. - The company offers competitive employee benefits and well-being packages, focusing on mental health, nutrition, and physical activity, to enhance employee performance[86]. - The company is committed to developing talent from within, providing extensive learning and development resources for employees at all levels[87]. Risks and Challenges - The company faces risks related to the failure to innovate and market products effectively, which could materially affect its prospects[94]. - Manufacturing and quality problems could materially affect the company's business, especially as it expands into new markets[96]. - The company relies on key physicians and research institutions for product development and marketing, and any disruption in these relationships could adversely impact its business[98]. - The company is subject to risks associated with public health crises, which could result in material adverse impacts on its financial condition and operations[99]. - The company faces challenges in recruiting and retaining qualified talent, which is critical for its continued success and operational stability[105]. - The integration of acquired businesses and technologies may be costly and could divert resources from other product developments, potentially impacting overall business performance[106]. - The company has been impacted by domestic and global economic conditions, which may affect sales and operations due to factors like inflation and interest rates[111]. - Changes in health care legislation and reimbursement policies could adversely affect demand for the company's products and their pricing[112]. - The company is involved in pending or threatened lawsuits related to products, workplace matters, and governmental investigations, which may impact financial performance[236]. - Legal accruals require significant judgment due to the complexities and uncertainties of each case, affecting the company's financial statements[236]. Acquisitions and Divestitures - The company sold its Critical Care product group to Becton, Dickinson and Company on September 3, 2024, which may introduce operational complexities and risks[108]. - The company entered into agreements to acquire multiple medical device companies for a total cash purchase price of $1.5 billion, with $1.1 billion paid upon closing of the transactions[211]. - The company sold its Critical Care product group for $4.2 billion in cash, completing the sale in early September 2024[212]. - The sale of Critical Care to BD was completed on September 3, 2024, incurring expenses of $19.0 million for consulting, legal, and advisory services related to the transaction[181].

Core Insights - Edwards Lifesciences' fourth-quarter performance was supported by its comprehensive structural heart disease portfolio, particularly in the Surgical Structural Heart business and TAVR segment, despite potential growth challenges from macroeconomic volatility and currency impacts [1][8]. Company Performance - In the past year, Edwards Lifesciences' shares declined by 13.8%, contrasting with a 4.8% growth in the industry and a 24.1% increase in the S&P 500 [2]. - The company has a market capitalization of $44.63 billion and has consistently surpassed earnings estimates over the last four quarters, with an average surprise of 2.60% [2]. Business Segments - The Surgical Structural Heart segment grew by 5% year-over-year in the fourth quarter, driven by strong global adoption of premium surgical technologies such as INSPIRIS, MITRIS, and KONECT [4]. - The TAVR platform achieved a 5.3% year-over-year growth in the fourth quarter, with strong sales growth in both the U.S. and international markets, particularly in Europe and Japan [6][7]. Innovations and Acquisitions - Edwards Lifesciences is advancing its RESILIA tissue technology, with positive data from the COMMENCE trials supporting its portfolio's momentum [3]. - The company completed the acquisition of Endotronix in 2024, marking its entry into the implantable heart failure management market [5]. Economic Challenges - The company faces macroeconomic challenges, including inflation and geopolitical factors that could impact operating results [8]. - Staffing shortages and increased medical supply expenses post-pandemic are putting pressure on margins [9]. - Foreign exchange fluctuations have negatively affected gross margins, with a 30 basis point decrease in the fourth quarter compared to the previous year [10]. Financial Estimates - The Zacks Consensus Estimate for 2025 earnings per share remains at $2.45, while the estimate for 2024 revenues is projected at $5.81 billion, indicating a 2.6% decline from the previous year [11].

Core Insights - Edwards Lifesciences reported fourth-quarter sales of $1.39 billion, exceeding the consensus estimate of $1.36 billion, reflecting a 9% year-over-year growth across all product groups [1] - Adjusted earnings per share were 59 cents, surpassing analysts' expectations of 55 cents [1] - The company anticipates continued growth driven by key segments, including TAVR and TMTT, with guidance for Q1 2025 adjusted EPS of 58-64 cents and revenue of $1.35 billion to $1.43 billion [5] Group 1: Financial Performance - Fourth-quarter TAVR global sales increased by 5.3% year-over-year to $1.04 billion [1] - TMTT sales reached $105 million for the quarter, with full-year sales of $352 million marking a 77% year-over-year increase [2] - The gross profit margin was 78.9%, down from 80.2% in the same period last year, while the operating profit margin was 22.6% [3] Group 2: Growth Drivers and Future Outlook - The CEO highlighted three key growth drivers: TAVR, Mitral and Tricuspid therapies, and emerging opportunities in Structural Heart Failure and Aortic Regurgitation [4] - The company expects adjusted operating margins of 27%-28% for 2025, with further annual operating profit margin expansion anticipated [5] - Analysts see potential for high-single- to low-double-digit sales growth, driven by increased adoption in underpenetrated markets and structural heart expansion [6][7] Group 3: Market Position and Stock Performance - Continued strength in TMTT supports Edwards' market position, with upcoming data and new product launches as potential catalysts for growth [7] - The stock price increased by 6.19% to $75.30 following the earnings report [7]

Core Insights - Edwards Lifesciences Corporation reported fourth-quarter 2024 adjusted earnings per share (EPS) of 59 cents, exceeding the Zacks Consensus Estimate by 7.3% and reflecting a 7.3% increase year-over-year [1][2] - The company achieved fourth-quarter sales of $1.39 billion, a 9.4% year-over-year increase, surpassing the Zacks Consensus Estimate by 2.2% [4] - Despite strong performance in earnings and revenues, the company experienced a contraction in both gross and operating margins during the quarter [15] Financial Performance - Full-year adjusted EPS was $2.43, a 9.5% increase from 2023, but missed the Zacks Consensus Estimate by 5.1% [2] - GAAP EPS from continuing operations was 58 cents, compared to 55 cents in the fourth quarter of 2023 [2] - Gross profit for the quarter was $1.09 billion, up 7.7% year-over-year, with a gross margin of 78.9%, down 126 basis points from the previous year [10][11] Sales Breakdown - Global sales in the Transcatheter Aortic Valve Replacement (TAVR) product group reached $1.04 billion, a 5.8% year-over-year increase [5] - Transcatheter Mitral and Tricuspid Therapies (TMTT) sales totaled $105.1 million, up 87.7% from the prior year [7] - Surgical Structural Heart sales were $244.4 million, reflecting a 5.8% increase year-over-year [8] Cash Position and Debt - The company ended the fourth quarter with cash and cash equivalents of $3.00 billion, significantly up from $1.14 billion at the end of 2023 [12] - Debt remained stable at $600 million, consistent with the previous year [12] Guidance - For 2025, the company projects constant currency sales growth of 8-10%, with a Zacks Consensus Estimate of $5.81 billion [13] - Adjusted EPS is expected to be in the range of $2.40-$2.50, with the first-quarter EPS projected between 58-64 cents [13][14]

Financial Data and Key Metrics Changes - For the full year 2024, total company sales grew 9% to $5.4 billion, aligning with original sales growth guidance [10][34] - Adjusted earnings per share for Q4 was $0.59, with GAAP earnings per share at $0.58 [34] - Adjusted gross profit margin for Q4 was 79%, down from 80% in the prior year [35] - Selling, general and administrative expenses in Q4 were $492 million, or 35.5% of sales, compared to $417 million in the prior year [36] - Research and development expenses in Q4 grew 12% year-over-year to $271 million, or 19.6% of sales [37] Business Line Data and Key Metrics Changes - TAVR full year 2024 global sales were $4.1 billion, increasing 6% year-over-year [18] - TMTT reported Q4 sales of $105 million, with full year sales of $352 million, a 77% increase year-over-year [26] - Surgical product group full year 2024 global sales were $981 million, up 6% versus the prior year [32] Market Data and Key Metrics Changes - TAVR sales growth was driven by the U.S. and Europe, with Q4 global sales of $1.04 billion, increasing 5.3% over the prior year [18][19] - Sales in Japan grew at a slower pace but still increased sequentially and year-over-year [24] - TMTT is expected to deliver over $500 million in sales in 2025, reflecting strong growth potential [15][31] Company Strategy and Development Direction - The company aims to solve unmet patient needs in structural heart disease, focusing on TAVR and TMTT as key growth drivers [9][11] - Strategic acquisitions in 2024, including JC Medical, JenaValve, and Endotronix, are expected to enhance the company's portfolio [12] - The company plans to grow total sales by 10% annually on average, with a focus on strengthening profit margins [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth opportunities in TAVR and TMTT, particularly with upcoming FDA approvals and guideline changes [15][46] - The company anticipates a sequential increase in Q1 sales, although growth rates for TAVR and total company sales are expected to be below the low end of full-year guidance [45][46] - Management highlighted the importance of clinical evidence and expanding indications for patients as catalysts for future growth [19][21] Other Important Information - The company maintains a strong balance sheet with approximately $3 billion in cash and cash equivalents as of December 31, 2024 [43] - Foreign exchange rates are expected to have a $130 million or 2.5% downside to sales in 2025 compared to the prior year [42] Q&A Session Summary Question: Dynamics driving TMTT performance in 2024 - Management noted that both PASCAL and EVOQUE contributed to TMTT's growth, with increasing adoption in the U.S. and Europe [51][54] Question: Sequential deceleration in Q1 guidance - Management explained that while Q4 ended strong, seasonal factors and one less selling day in Q1 are expected to impact growth rates [60][106] Question: Operating expenses guidance for 2025 - Management provided insights on maintaining flat SG&A and R&D spending while improving operating margins [65][67] Question: Regional pressures affecting TAVR growth - Management acknowledged some regional pressures, particularly in Japan, but emphasized commitment to enhancing capabilities in those markets [70] Question: Impact of NTAP and NCD on EVOQUE - Management expressed confidence that the NTAP and upcoming NCD will facilitate patient access and support growth for EVOQUE [80][112] Question: Training and adoption of EVOQUE - Management indicated ongoing training programs for EVOQUE, with a focus on expanding the number of centers and physicians involved [90][92]

Sales Performance - Q4 sales increased by 9% to $1.39 billion, exceeding expectations, with growth across all product groups [4]. - TAVR sales in Q4 reached $1.04 billion, growing 6% year-over-year, with full-year 2024 sales of $4.1 billion also up 6% [5]. - TMTT sales surged 88% in Q4 to $105 million, contributing significantly to overall growth, with full-year sales of $352 million, a 78% increase [9]. - The company reported GAAP net sales of $1,385.8 million for Q4 2024, representing a 9.4% increase from $1,266.4 million in Q4 2023 [41]. - Total net sales for the twelve months ended December 31, 2024, were $5,439.5 million, representing an increase of 8.6% compared to $5,010.0 million in 2023 [42]. - Sales in the United States for Q4 2024 were $812.9 million, reflecting a growth rate of 9.2% from $744.3 million in Q4 2023 [43]. - Total sales for the year 2024 in Europe were $1,321.7 million, an increase of 12.0% from $1,180.2 million in 2023 [43]. Financial Metrics - Adjusted EPS for Q4 was $0.59, driven by strong top-line performance, with guidance for 2025 adjusted EPS between $2.40 and $2.50 [4][16]. - Gross profit margin for Q4 was 78.9%, with an expected adjusted gross profit margin of 78% to 79% for full-year 2025 [13]. - Non-GAAP adjusted net income for Q4 2024 was $349.4 million, with diluted EPS of $0.59, compared to $335.6 million and $0.55 in Q4 2023 [41]. - The effective tax rate for Q4 2024 was 13.3%, an increase from 11.1% in Q4 2023 [41]. - Gross profit margin for 2024 was 79.5%, slightly down from 80.5% in 2023 [42]. - Operating income for 2024 was $1,378.7 million, with an operating profit margin of 25.3%, compared to $1,308.9 million and 26.1% in 2023 [42]. - Adjusted net income for 2024 was $1,455.2 million, resulting in an adjusted EPS of $2.43, up from $1,354.5 million and $2.22 in 2023 [42]. Future Outlook - The company anticipates 2025 constant currency sales growth of 8% to 10% [4]. - The company projects Q1 2025 total sales between $1.35 billion and $1.43 billion, with adjusted EPS of $0.58 to $0.64 [18]. - Edwards expects mid-year approval for asymptomatic TAVR indication in the U.S., which is anticipated to drive future growth [4][7]. - The company anticipates continued growth in its product lines, particularly in the Transcatheter Mitral and Tricuspid Therapies segment, which has shown strong performance [43]. Expenses and Charges - Research and development expenses rose 12% to $271 million in Q4, representing 19.6% of sales, with expectations to maintain this level in 2025 [15]. - The company incurred litigation expenses of $8.9 million in Q1 2024, compared to $6.5 million in Q1 2023, with total litigation expenses for 2024 reaching $40.8 million [32]. - Restructuring expenses in Q3 2024 amounted to $32.9 million, primarily related to severance expenses due to a global workforce realignment [34]. - The company recorded a $30.0 million charge in Q3 2024 for a charitable contribution to the Edwards Lifesciences Foundation [34]. Cash Position - Cash and cash equivalents stood at approximately $3.0 billion as of December 31, 2024, with total debt around $600 million [17].

Core Viewpoint - Edwards Lifesciences (EW) is expected to report a decline in quarterly earnings and revenues, with earnings per share projected at $0.55, down 14.1% year-over-year, and revenues forecasted at $1.36 billion, reflecting an 11.2% decrease [1] Earnings Estimates - The consensus EPS estimate has been revised down by 0.2% over the past 30 days, indicating a collective reassessment by analysts [2] - Changes in earnings estimates are crucial for predicting investor reactions, as empirical studies show a strong correlation between earnings estimate revisions and short-term stock performance [3] Revenue Projections - Analysts project 'Net Sales- Transcatheter Mitral and Tricuspid Therapies' to reach $93.28 million, a year-over-year increase of 66.6% [5] - 'Net Sales- Surgical Structural Heart' is expected to be $249.92 million, reflecting a slight increase of 0.7% year-over-year [5] - 'Net Sales- Transcatheter Aortic Valve Replacement' is forecasted at $1.02 billion, indicating a 3.9% increase from the previous year [6] Regional Sales Estimates - 'Net Sales- Europe' is estimated at $336.88 million, showing a year-over-year decline of 2.3% [6] - 'Net Sales- Outside of the United States' is projected to be $571.14 million, reflecting a decrease of 10.7% year-over-year [6] - 'Net Sales- United States' is expected to reach $837.97 million, down 6.3% from the previous year [7] - 'Net Sales- Japan' is forecasted at $84.00 million, indicating a significant decline of 25% year-over-year [7] - 'Net Sales- Rest of World' is projected to be $150.26 million, reflecting a decrease of 17.8% from the year-ago quarter [7] Stock Performance - Over the past month, Edwards Lifesciences shares have decreased by 2.8%, contrasting with the Zacks S&P 500 composite's increase of 2.1% [7] - The company holds a Zacks Rank 3 (Hold), suggesting its performance is likely to align with the overall market in the near term [7]

Core Viewpoint - Edwards Lifesciences Corporation is experiencing a positive shift in its stock performance, driven by an upgrade from Stifel analyst Rick Wise, who raised the price target to $90 from $75, indicating a potential re-acceleration in TAVR growth by 2025 [1][6]. Group 1: TAVR Growth Potential - Recent discussions with TAVR physicians suggest an increase in post-EARLY TAVR referrals, indicating a positive trend in TAVR procedures [2]. - The FDA is anticipated to expand the TAVR label for asymptomatic severe aortic stenosis in mid-2025, with some physicians already treating patients ahead of this change [2]. - TAVR growth had slowed post-COVID, but a more realistic growth forecast of 5-7% for 2025, combined with new data and the expected label expansion, suggests a rebound in TAVR growth [3]. Group 2: Business Strategy and Valuation - The sale of Edwards' Critical Care business to Becton, Dickinson and Company in September 2024 is expected to positively impact the company's valuation, as this segment was the lowest-growth area and non-structural heart asset [4]. - With a focus solely on structural heart, Edwards could potentially trade at a higher-than-historical multiple post-sale [4]. Group 3: Financial Outlook - At the recent annual Analyst Day, the CFO emphasized an increased focus on operating leverage, with expectations of operating margin expansion of 50-100 basis points annually starting in 2026 [5]. - This shift towards margin expansion and EPS growth is viewed positively, as investors may increasingly focus on these aspects as 2026 approaches [6].

Earnings Expectations - Edwards Lifesciences is expected to report Q4 2024 results soon [1] - The Zacks Consensus Estimate for Q4 2024 revenues is $1.36 billion, indicating an 11.2% decline YoY [3] - The Zacks Consensus Estimate for Q4 2024 net earnings is 55 cents per share, a 14.1% drop YoY [3] - The company projected Q4 2024 total sales between $1.33 billion and $1.39 billion, with adjusted EPS between 53 cents and 57 cents [3] Historical Performance - In the last reported quarter, the company's adjusted EPS of 67 cents matched the Zacks Consensus Estimate [2] - The company's earnings beat estimates in one of the trailing four quarters and matched estimates in the other three [2] - EW has a trailing four-quarter earnings surprise of 0.78% on average [2] Business Segments and Growth Drivers - The company likely gained from its patient-focused innovation strategy, favorable hospitalization trends, and strong global adoption of transcatheter heart valves [5] - The Transcatheter Aortic Valve Replacement (TAVR) arm is expected to have seen continued growth in procedures globally, driven by strong demand for the SAPIEN platform [7] - The Transcatheter Mitral and Tricuspid Therapies (TMTT) segment's PASCAL platform likely maintained strong growth momentum globally, supported by differentiated therapies and positive trial results [10] - The Surgical Structural Heart segment is expected to have recorded strong growth, driven by the penetration of premium products like RESILIA technology, MITRIS RESILIA valve, INSPIRIS, and KONECT [12] Challenges and Headwinds - The absence of the Critical Care business operation through September 2024 is expected to have impacted Q4 total revenues [5] - The Critical Care business, sold to Becton, Dickinson and Company for $4.2 billion, recorded $246 million in revenues in Q2 2024, reflecting 7% YoY growth [6] - Regional pressures, particularly in Japan, and slower market growth may have continued to hamper growth in Q4 [8] - Hurricanes in the southeast and a one-time impact from a China distributor rebate adjustment are expected to have impacted TAVR performance [9] - Staffing shortages and geopolitical challenges likely impeded growth in the quarter [13] Quantitative Model Predictions - The company has an Earnings ESP of -0.03% and a Zacks Rank 3, indicating a lower chance of beating estimates [14] Other Medical Stocks to Watch - Masimo (MASI) has an Earnings ESP of +4.05% and a Zacks Rank 1, with an average earnings surprise of 17.10% in the trailing four quarters [15][16] - Merit Medical Systems (MMSI) has an Earnings ESP of +3.03% and a Zacks Rank 2, with an average earnings surprise of 6.42% in the trailing four quarters [16][17] - Cencora (COR) has an Earnings ESP of +0.71% and a Zacks Rank 2, with an average earnings surprise of 2.45% in the trailing four quarters [17][18]