Edwards Lifesciences Earnings: Soft Sapien Sales Drive Shares Down but Merely Nick Our Valuation

Edwards Lifesciences delivered second-quarter results that fell short of our, management’s, and the market’s expectations, leading to shares swooning by over 20% in premarket trading. We’ve lowered our fair value estimate slightly to $84 per share, down from $86, after dialing down our full-year estimate for Sapien growth to 5.5% (down from 8% previously) and incorporating the sale of the critical care business that is set to close in fall. Despite the current softness in the transcatheter aortic valve, or TAVR, business, we don’t think Edwards’ narrow economic moat is at risk. The firm’s intangible assets, including expertise in heart valves and innovative pipeline of devices, remain strong, from our perspective.