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Boston Scientific (BSX) Meets Q2 Earnings Estimate, Views Up
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Boston Scientific Corporation (BSX - Free Report) announced adjusted earnings per share (EPS) (after considering certain one-time adjustments other than amortization expense) of 19 cents in the second quarter of 2016, up 26.7% from the year-ago quarter.
However, considering amortized expense adjustments, the quarter’s adjusted EPS came in at 27 cents, up 22.7% from the year-ago adjusted number. The quarter’s number remained at par with the Zacks Consensus Estimate and in line with the upper end of the company's adjusted EPS guidance range of 25–27 cents.
Without these adjustments, the company reported loss of 15 cents per share, a significant slash compared to earnings of 8 cents a year ago.
Revenues in Detail
Revenues in the second quarter were up 15% year over year on a reported basis and up 13% on an operational basis (at constant exchange rate or CER) to $2.13 billion. The figure sailed past the company’s guidance of $2.01–$2.06 billion and also exceeded the Zacks Consensus Estimate of $2.04 billion.
Organic revenue growth in the second quarter (excluding the impact of changes in foreign currency exchange rates and sales from the acquisitions of the American Medical Systems (AMS) male urology portfolio in the year-ago quarter) was 10% year over year.
Geographically, in the second quarter, the company achieved 154% growth in the U.S. (8% organic), 16% growth in Europe (9%), 18% in the Asia, Middle East and Africa (AMEA) region (16%) and 8% in the emerging markets (20%), all at CER.
Segment Analysis
Boston Scientific currently has three global reportable segments: Cardiovascular, Rhythm Management and MedSurg.
The company generates maximum revenues from Cardiovascular, which comprises Interventional Cardiology and Peripheral Interventions. Sales in these sub-segments were $579 million (up 12% year over year at CER) and $258 million (up 14%), respectively, during the second quarter.
The second largest contributor to Boston Scientific’s top line was Rhythm Management, which includes Cardiac Rhythm Management (CRM) and Electrophysiology. CRM reflected a 4% year-over-year increase in sales to $477 million at CER.
Worldwide sales from pacemakers (within CRM) increased 15.2% to $144 million, while defibrillators were marginally down 0.6% to $333 million.
Electrophysiology sales went up 6% year over year at CER to $60 million.
Other segments like Endoscopy, Urology and Pelvic Health and Neuromodulation (coming under the MedSurg broader group) recorded sales of $361 million (up 11% at CER), $256 million (up 90%) and $135 million (up 12%), respectively.
Margins
Gross margin contracted 76 basis points (bps) year over year to 69.9% on more than 18% increase in cost of product sold. Adjusted operating margin however, expanded 211 bps to 21.9% in the quarter. During the reported quarter, selling, general and administrative expenses improved 11.3% to $779 million, while research and development expenses increased 0.9% to $222 million. Royalty expense went up 11.1% to $20 million.
Balance Sheet
Boston Scientific exited the second quarter of 2016 with cash and cash equivalents of $438 million, up from $338 million at the end of the first quarter. At the end of the second quarter, the company had total long-term debt of $5.42 billion, a marginal reduction from $5.68 billion at the end of the first quarter.
Boston Scientific has provided its third-quarter 2016 guidance with an update to its earlier provided full-year 2016 forecast. The company raised its outlook for 2016 revenues to the range of $8.27–$8.37 billion (annualized growth of 11% to 12% on both reported as well as operational basis) from the earlier provided band of $8.075–$8.225 billion. The current Zacks Consensus Estimate for revenues is $8.15 billion, falling below the guidance range.
Adjusted EPS guidance for 2016 has also been raised to the range of $1.07 to $1.11 from the earlier projection of $1.06 to $1.10. The Zacks Consensus Estimate of $1.09 falls within the guidance range.
For the third quarter of 2016, adjusted earnings are expected in the band of 25–27 cents per share on revenues of $2.035–$2.085 billion. The Zacks Consensus Estimate for EPS stands at 27 cents, while that for revenues is $2.04 billion.
Our Take
Amid challenging economic conditions, a competitive environment and severe currency headwinds, Boston Scientific posted a mixed third-quarter 2016, with earnings in line with the Zacks Consensus Estimate and revenues ahead of the mark. While foreign exchange headwinds still continues to pose challenges, we are concerned with the still sluggish defibrillator performance within the company’s core CRM segment.
Nevertheless, Boston Scientific is leaving no stone unturned to strengthen its core businesses and invest in new technologies and global markets, which accounted for the sales upside across all its geographies in the second quarter. Moreover, we are also encouraged with the company gaining a number of approvals for its products, both in the domestic market and outside.
Among recent launches, ones worth mentioning are the FDA approval for the Precision Montage MRI Spinal Cord Stimulator System, the expanded offering of MR-conditional products with FDA approval of the ImageReady MR-Conditional Pacing System, including the INGEVITY MRI pacing leads and CE Mark of the EMBLEM MRI S-ICD System among many others. The company also received FDA approval of the IntellaNav XP and the IntellaNav MiFi XP navigation-enabled ablation catheters for the treatment of patients with Type-I atrial flutter.
Zacks Rank
Currently, Boston Scientific holds a Zacks Rank #2 (Buy). Some other well-ranked Medical Product stocks are Baxter International Inc. (BAX - Free Report) , GW Pharmaceuticals plc and Vascular Solutions Inc. , all with a Zacks Rank #2.
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Boston Scientific (BSX) Meets Q2 Earnings Estimate, Views Up
Boston Scientific Corporation (BSX - Free Report) announced adjusted earnings per share (EPS) (after considering certain one-time adjustments other than amortization expense) of 19 cents in the second quarter of 2016, up 26.7% from the year-ago quarter.
However, considering amortized expense adjustments, the quarter’s adjusted EPS came in at 27 cents, up 22.7% from the year-ago adjusted number. The quarter’s number remained at par with the Zacks Consensus Estimate and in line with the upper end of the company's adjusted EPS guidance range of 25–27 cents.
Without these adjustments, the company reported loss of 15 cents per share, a significant slash compared to earnings of 8 cents a year ago.
Revenues in Detail
Revenues in the second quarter were up 15% year over year on a reported basis and up 13% on an operational basis (at constant exchange rate or CER) to $2.13 billion. The figure sailed past the company’s guidance of $2.01–$2.06 billion and also exceeded the Zacks Consensus Estimate of $2.04 billion.
Organic revenue growth in the second quarter (excluding the impact of changes in foreign currency exchange rates and sales from the acquisitions of the American Medical Systems (AMS) male urology portfolio in the year-ago quarter) was 10% year over year.
Geographically, in the second quarter, the company achieved 154% growth in the U.S. (8% organic), 16% growth in Europe (9%), 18% in the Asia, Middle East and Africa (AMEA) region (16%) and 8% in the emerging markets (20%), all at CER.
Segment Analysis
Boston Scientific currently has three global reportable segments: Cardiovascular, Rhythm Management and MedSurg.
The company generates maximum revenues from Cardiovascular, which comprises Interventional Cardiology and Peripheral Interventions. Sales in these sub-segments were $579 million (up 12% year over year at CER) and $258 million (up 14%), respectively, during the second quarter.
The second largest contributor to Boston Scientific’s top line was Rhythm Management, which includes Cardiac Rhythm Management (CRM) and Electrophysiology. CRM reflected a 4% year-over-year increase in sales to $477 million at CER.
Worldwide sales from pacemakers (within CRM) increased 15.2% to $144 million, while defibrillators were marginally down 0.6% to $333 million.
Electrophysiology sales went up 6% year over year at CER to $60 million.
Other segments like Endoscopy, Urology and Pelvic Health and Neuromodulation (coming under the MedSurg broader group) recorded sales of $361 million (up 11% at CER), $256 million (up 90%) and $135 million (up 12%), respectively.
Margins
Gross margin contracted 76 basis points (bps) year over year to 69.9% on more than 18% increase in cost of product sold. Adjusted operating margin however, expanded 211 bps to 21.9% in the quarter. During the reported quarter, selling, general and administrative expenses improved 11.3% to $779 million, while research and development expenses increased 0.9% to $222 million. Royalty expense went up 11.1% to $20 million.
Balance Sheet
Boston Scientific exited the second quarter of 2016 with cash and cash equivalents of $438 million, up from $338 million at the end of the first quarter. At the end of the second quarter, the company had total long-term debt of $5.42 billion, a marginal reduction from $5.68 billion at the end of the first quarter.
BOSTON SCIENTIF Price, Consensus and EPS Surprise
BOSTON SCIENTIF Price, Consensus and EPS Surprise | BOSTON SCIENTIF Quote
Guidance
Boston Scientific has provided its third-quarter 2016 guidance with an update to its earlier provided full-year 2016 forecast. The company raised its outlook for 2016 revenues to the range of $8.27–$8.37 billion (annualized growth of 11% to 12% on both reported as well as operational basis) from the earlier provided band of $8.075–$8.225 billion. The current Zacks Consensus Estimate for revenues is $8.15 billion, falling below the guidance range.
Adjusted EPS guidance for 2016 has also been raised to the range of $1.07 to $1.11 from the earlier projection of $1.06 to $1.10. The Zacks Consensus Estimate of $1.09 falls within the guidance range.
For the third quarter of 2016, adjusted earnings are expected in the band of 25–27 cents per share on revenues of $2.035–$2.085 billion. The Zacks Consensus Estimate for EPS stands at 27 cents, while that for revenues is $2.04 billion.
Our Take
Amid challenging economic conditions, a competitive environment and severe currency headwinds, Boston Scientific posted a mixed third-quarter 2016, with earnings in line with the Zacks Consensus Estimate and revenues ahead of the mark. While foreign exchange headwinds still continues to pose challenges, we are concerned with the still sluggish defibrillator performance within the company’s core CRM segment.
Nevertheless, Boston Scientific is leaving no stone unturned to strengthen its core businesses and invest in new technologies and global markets, which accounted for the sales upside across all its geographies in the second quarter. Moreover, we are also encouraged with the company gaining a number of approvals for its products, both in the domestic market and outside.
Among recent launches, ones worth mentioning are the FDA approval for the Precision Montage MRI Spinal Cord Stimulator System, the expanded offering of MR-conditional products with FDA approval of the ImageReady MR-Conditional Pacing System, including the INGEVITY MRI pacing leads and CE Mark of the EMBLEM MRI S-ICD System among many others. The company also received FDA approval of the IntellaNav XP and the IntellaNav MiFi XP navigation-enabled ablation catheters for the treatment of patients with Type-I atrial flutter.
Zacks Rank
Currently, Boston Scientific holds a Zacks Rank #2 (Buy). Some other well-ranked Medical Product stocks are Baxter International Inc. (BAX - Free Report) , GW Pharmaceuticals plc and Vascular Solutions Inc. , all with a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>