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Will Boston Scientific (BSX) Pull a Surprise in Q4 Earnings?
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Boston Scientific Corporation (BSX - Free Report) is scheduled to report fourth-quarter and full-year 2016 results before the opening bell on Feb 2. Last quarter, the company’s earnings were in line with the Zacks Consensus Estimate. It posted an average beat of 5.17% in the trailing four quarters. Let’s see how things are shaping up prior to this announcement.
Factors at Play
Banking on a strong global team, perfect execution of long-term strategic plans including portfolio expansion, globalization efforts and investments into faster growth markets, Boston Scientific strongly expects its solid performance trend to continue in the fourth quarter and beyond.
This is in line with the company’s raised 2016 guidance for revenues and adjusted EPS (earnings per share) which it declared three months back. The revenue guidance was raised to the range of $8.34–$8.39 billion (annualized growth of 11% to 12% on reported basis and 12% on operational basis) from the earlier provided band of $8.27–$8.37 billion.Lower end of the adjusted EPS guidance for 2016 was also raised to a range of $1.09−$1.11 from the earlier projection of $1.07−$1.11.
For the fourth quarter, adjusted earnings are expected in the band of $0.27–$0.29 per share on revenues of $2.14–$2.19 billion.
Boston Scientific continues to expect full-year 2016 adjusted gross margin to be approximately 72%, which includes expected 75 basis points to 100 basis points negative impact from unfavorable foreign exchange.
With regard to adjusted operating margin, Boston Scientific’s ninth successive quarters of improvement and raised operating margin guidance have encouraged us to expect another quarter of strong sequential growth with more noticeable improvement in the Rhythm Management segment. According to Boston Scientific, it is currently on track to reach full-year adjusted operating margin guidance of 24% to 24.5%, as well as to achieve the target of 25% plus in operating margin in 2017.
We are also optimistic about the company’s gradually improving performance in Interventional Cardiology, led by an innovative portfolio and robust commercial teams globally. The company is consistently gaining share in a number of cardiovascular segments and DES, as a differentiated platform of premier and synergy continues to build momentum and gain share globally.
Meanwhile, MedSurg is expected to demonstrate consistent performance, led by endoscopy. Urology and Women's Health are also estimated to grow beyond market levels driven by investment strategies in key international geographies.
However, the severe currency headwinds that Boston Scientific has been facing over the recent past remain a concern. We note that as the company is recording 47% of its sales from the international markets, it remains highly exposed to currency fluctuations. For 2016, Boston Scientific expects currency headwind to the tune of 5 cents per share on adjusted earnings relative to the year-ago quarter.
Further, sluggish CRM sales over the recent past continue to weigh on the stock. At the beginning of 2016, Boston Scientific predicted a slowdown in worldwide CRM sales for the entire year due to replacement cycle headwinds and competitive launches in the U.S. Although the company is currently expecting a rebound in its CRM performance in the second half of the year, we remain on the sidelines based on the challenges it is still facing in this business, especially in the U.S.
Earnings Whispers
Our proven model does not conclusively show that Boston Scientific is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: Boston Scientific’s Earnings ESP is 0.00% since both the Most Accurate estimate and the Zacks Consensus Estimate stand at 27 cents.
Zacks Rank: Boston Scientific has a Zacks Rank #3, which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are three companies you may want to consider as our proven model shows they have the right combination of elements to post an earnings beat this quarter:
Molina Healthcare Inc. (MOH - Free Report) has an Earnings ESP of +5.33% and a Zacks Rank #2.
Universal Health Services, Inc. (UHS - Free Report) has an Earnings ESP of +4.97% and a Zacks Rank #2.
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Will Boston Scientific (BSX) Pull a Surprise in Q4 Earnings?
Boston Scientific Corporation (BSX - Free Report) is scheduled to report fourth-quarter and full-year 2016 results before the opening bell on Feb 2. Last quarter, the company’s earnings were in line with the Zacks Consensus Estimate. It posted an average beat of 5.17% in the trailing four quarters. Let’s see how things are shaping up prior to this announcement.
Factors at Play
Banking on a strong global team, perfect execution of long-term strategic plans including portfolio expansion, globalization efforts and investments into faster growth markets, Boston Scientific strongly expects its solid performance trend to continue in the fourth quarter and beyond.
This is in line with the company’s raised 2016 guidance for revenues and adjusted EPS (earnings per share) which it declared three months back. The revenue guidance was raised to the range of $8.34–$8.39 billion (annualized growth of 11% to 12% on reported basis and 12% on operational basis) from the earlier provided band of $8.27–$8.37 billion.Lower end of the adjusted EPS guidance for 2016 was also raised to a range of $1.09−$1.11 from the earlier projection of $1.07−$1.11.
For the fourth quarter, adjusted earnings are expected in the band of $0.27–$0.29 per share on revenues of $2.14–$2.19 billion.
Boston Scientific continues to expect full-year 2016 adjusted gross margin to be approximately 72%, which includes expected 75 basis points to 100 basis points negative impact from unfavorable foreign exchange.
Boston Scientific Corp. Price and EPS Surprise
Boston Scientific Corp. Price and EPS Surprise | Boston Scientific Corp. Quote
With regard to adjusted operating margin, Boston Scientific’s ninth successive quarters of improvement and raised operating margin guidance have encouraged us to expect another quarter of strong sequential growth with more noticeable improvement in the Rhythm Management segment. According to Boston Scientific, it is currently on track to reach full-year adjusted operating margin guidance of 24% to 24.5%, as well as to achieve the target of 25% plus in operating margin in 2017.
We are also optimistic about the company’s gradually improving performance in Interventional Cardiology, led by an innovative portfolio and robust commercial teams globally. The company is consistently gaining share in a number of cardiovascular segments and DES, as a differentiated platform of premier and synergy continues to build momentum and gain share globally.
Meanwhile, MedSurg is expected to demonstrate consistent performance, led by endoscopy. Urology and Women's Health are also estimated to grow beyond market levels driven by investment strategies in key international geographies.
However, the severe currency headwinds that Boston Scientific has been facing over the recent past remain a concern. We note that as the company is recording 47% of its sales from the international markets, it remains highly exposed to currency fluctuations. For 2016, Boston Scientific expects currency headwind to the tune of 5 cents per share on adjusted earnings relative to the year-ago quarter.
Further, sluggish CRM sales over the recent past continue to weigh on the stock. At the beginning of 2016, Boston Scientific predicted a slowdown in worldwide CRM sales for the entire year due to replacement cycle headwinds and competitive launches in the U.S. Although the company is currently expecting a rebound in its CRM performance in the second half of the year, we remain on the sidelines based on the challenges it is still facing in this business, especially in the U.S.
Earnings Whispers
Our proven model does not conclusively show that Boston Scientific is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: Boston Scientific’s Earnings ESP is 0.00% since both the Most Accurate estimate and the Zacks Consensus Estimate stand at 27 cents.
Zacks Rank: Boston Scientific has a Zacks Rank #3, which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are three companies you may want to consider as our proven model shows they have the right combination of elements to post an earnings beat this quarter:
Cempra Inc. has an Earnings ESP of +15.79% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Molina Healthcare Inc. (MOH - Free Report) has an Earnings ESP of +5.33% and a Zacks Rank #2.
Universal Health Services, Inc. (UHS - Free Report) has an Earnings ESP of +4.97% and a Zacks Rank #2.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see specific recommendations to help you pick today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>