Why Edwards Lifesciences Sky-Rocketed Today

By Markets Fool.com

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

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What: Shares in Edwards Lifesciences jumped by 9.8% today after the company reported financial results for the fourth quarter that were better than Wall Street analysts had forecast.

So what: The medical device maker's sales surged higher in the fourth quarter.

Thanks to rising demand for the company's transcatheter heart valves, or THVs, Edward Lifesciences' fourth quarter sales climbed 15% to $618 million. Sales of transcatheter heart valves, which are used as an alternative to open heart surgery in high-risk patients, jumped by 46% year-over-year to $267.5 million.

The company's surgical heart valve therapy product segment sales were essentially unchanged year-over-year at $206.1 million. Revenue from the critical care group segment was also in line with a year ago at $144.4 million.

Rising product unit volume helped boost operating margin in the quarter to 74%, up from 73.2% a year ago and that led to adjusted net income of $1.06 per share in the quarter. For comparison, net income per share in the fourth quarter of 2013 totaled $0.95.

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The solid fourth quarter performance helped lift full year 2014 sales to $2.3 billion, up 13.6% from 2013. After removing one-time items, net income per share last year was $3.50, up 8.4% year-over-year.

Now what: Edwards Lifesciences gets a good chunk of its sales overseas, and given that the dollar has strengthened, the company expects that currency will pose a headwind in 2015. As a result, the company is guiding for revenue of between $2.3 billion and $2.5 billion, which is a little lower than its previously issued forecast. However, thanks to currency hedges and rising demand for the transcatheter heart valves, Edwards Lifesciences expects that it will be able to deliver adjusted net income per share of between $4.00 and $4.30, up nicely from 2014.

While demand for transcatheter heart valves provides a nice tailwind, the year-over-year growth rate slowed in the fourth quarter from the third quarter's 55% pace. Also, Edwards Lifesciences faces a tough and well-heeled competitor in Medtronic. Regardless, Edwards Lifesciences' shares have been one of healthcare's best performers in the past year, and while shares aren't necessarily cheap -- its forward P/E ratio is 31.6 -- this company is a top choice for investors interested in medical device stocks.

The article Why Edwards Lifesciences Sky-Rocketed Today originally appeared on Fool.com.

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.