Introduction
On May 15, with Edwards Lifesciences (NYSE:EW) at $178, I provided an overview of the company. The reason I (again) went long EW and contributed an articles was the powerful clinical data from its PARTNER 3 study of patients with aortic stenosis who were good surgical risks. Surprisingly, the Edwards Sapien 3 catheter-inserted aortic valve provided superior to surgical therapy, not just non-inferior. Among my comments were the following hopeful one:
The secular opportunities and the company's leadership positions in transcatheter treatments may make the high P/E Edwards carries more than fair to investors.
After my article ran, EW ran into further profit-taking from its March-April $190+ all-time high trading range, and I added more EW to my starter position around the $180 level or below. Happily, the stock began surging, moving to all-time high closing territory in the $193-195 range when it reported after-hours Tuesday. The stock closed the after-hours session around $215, up about 10% from Tuesday's regular hours closing price.
This is EW's 3-year performance versus a health care ETF (XLV), a biotech index (BTK) and the S&P 500 (SPY):
(This chart may encompass most of the after-hours surge.)
Let's look at the quarter and see what excited the analysts and the algos.
Some good news and good potential for TAVR
The company wrote off its CENTERA transcatheter valve inventory. Adjusting for that and other discrete items, GAAP EPS of $1.14 was adjusted to $1.38. See p. 10 of the earnings report for details. As the Street uses non-GAAP adjusted earnings as its baseline, I will as well, but just for discussion purposes. EW often has lumpiness in its GAAP versus non-GAAP numbers, and sometimes they include material one-time legal gains.
The CENTERA inventory write-off was in a sense a good thing, because the SAPIEN 3 Ultra
