Medtech companies Boston Scientific, Intuitive, and Edwards are slated to release their earnings next.
In the rapidly evolving landscape of international trade, medical device manufacturers are not immune to the impact of tariffs. Two prominent players, Intuitive Surgical and Edwards Lifesciences, are navigating the complexities of tariffs and trade policies, with significant implications for their business operations and financial performance.
Intuitive Surgical, a leading robotic-assisted surgery company, manufactures approximately 90% of its instruments and accessories in Mexico. This production strategy, however, exposes the company to a 25% tariff on goods not compliant with the USMCA. Analysts project that this tariff could create a 2% headwind to the company's gross margins in fiscal year 2025, potentially reducing adjusted earnings per share by approximately 4.8%.
To counter these effects, Intuitive Surgical is implementing a multi-faceted approach. This includes passing incremental costs to customers, reconfiguring and diversifying its supply chain, making longer-term operational adjustments, and leveraging its strong financial position to withstand tariff-related disruptions better than smaller competitors.
Meanwhile, Edwards Lifesciences, a prominent player in heart valve replacement technologies, has its manufacturing facilities in the U.S., Singapore, Costa Rica, and Ireland. The company anticipates a mid-year expansion of its TAVR label as a catalyst for faster growth in 2025. BTIG analysts believe that the second half of 2025 will be a key period for Edwards Lifesciences' growth, driven by the expansion of its TAVR label and the early stages of growth in its Transcatheter Mitral and Tricuspid Technologies (TMTT) unit.
Analysts predict a 3% growth in Edwards' TAVR sales and a 57% increase in revenue for its TMTT unit. However, they expect limited room for upside going into Q1 2025 due to muted TAVR growth and the early stages of TMTT growth.
Other companies, such as Johnson & Johnson and Abbott, are also facing tariff challenges. Johnson & Johnson expects a tariff charge of $400M this year, while Abbott anticipates incurring a few hundred million dollars in tariff costs in 2025.
In the competitive medical device market, Boston Scientific is positioning itself favourably. Its Precision Flow Ablation (PFA) product, Farapulse, is strongly preferred by electrophysiologists over Medtronic's Pulseselect. This preference has led to a recent upgrade of Boston Scientific's stock rating to "buy" by Needham analysts due to less severe competition concerns for PFA.
Notably, Boston Scientific has stated that it "does not have meaningful levels of manufacturing or sourcing from Mexico, Canada, or China." This strategic decision may have insulated the company from some of the tariff-related pressures faced by its competitors.
In conclusion, tariffs are expected to impact the margins and earnings of Intuitive Surgical and Edwards Lifesciences in 2025, but both companies' multi-pronged mitigation plans and financial strength position them to handle these challenges over the longer term. However, near-term impacts such as margin compression and possible price increases to customers may limit growth or demand temporarily.
- Medical tech giant, Intuitive Surgical, with a significant presence in robotic-assisted surgery, is manufacturing 90% of its instruments in Mexico, exposing it to a 25% tariff under the USMCA.
- Analysts forecast that this tariff could present a 2% headwind to Intuitive Surgical's gross margins in fiscal year 2025, potentially reducing adjusted earnings per share by approximately 4.8%.
- To combat these effects, Intuitive Surgical is employing a multi-faceted strategy, including passing costs to customers, reshaping and diversifying its supply chain, making long-term operational adjustments, and utilizing its robust financial position to withstand tariff-related disruptions better than rivals.
- Edwards Lifesciences, prominent in heart valve replacement technologies, operates facilities in the US, Singapore, Costa Rica, and Ireland. Analysts foresee TAVR label expansion as a driver for accelerated growth in 2025, with optimistic growth predictions of 3% for Edwards' TAVR sales and a 57% increase in revenue for its Transcatheter Mitral and Tricuspid Technologies (TMTT) unit.
- In the medical device industry, Boston Scientific, developer of the popular Precision Flow Ablation (PFA) product Farapulse, is gaining advantage over Medtronic due to electrophysiologists preferring its PFA product.
- Boston Scientific's strategic decision to operate minimally from Mexico, Canada, or China may shield it from some tariff-related pressures faced by competitors.
- In the ongoing medtech landscape, trade tariffs will likely influence the earnings and margins of various companies in 2025, but a combination of resilient mitigation strategies, financial strength, and strategic business decisions may help navigate these challenges over the long term.
