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Boston Scientific (BSX) Tops Q4 Earnings, Offers 2017 View
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Boston Scientific Corporation (BSX - Free Report) posted adjusted earnings per share (EPS) (after considering certain one-time adjustments other than amortization expense) of 21 cents in the fourth quarter of 2016, up 31.3% from the year-ago quarter.
However, considering amortized expense adjustments, the quarter’s adjusted EPS came in at 30 cents, up 15.4% from the year-ago adjusted number. The figure exceeded the Zacks Consensus Estimate by a penny and also remained ahead of the company's adjusted EPS guidance range of 27–29 cents.
Without these adjustments, the company reported earnings of 9 cents per share, against a loss of 11 cents a year ago.
Full-year adjusted earnings (including amortized expense) came in at $1.11 per share, a 19.3% improvement from the year-ago period. It also remained ahead of the company’s guidance range of $1.09−$1.11.
Boston Scientific Corporation Price, Consensus and EPS Surprise
Revenues in the fourth quarter were up 11% year over year on both reported and operational basis (at constant exchange rate or CER) to $2.19 billion. The figure came in line with the upper end of the company’s guidance of $2.14–$2.19 billion and exceeded the Zacks Consensus Estimate of $2.16 billion.
Revenues for the full year were $8.38 billion, a 12% improvement on both reported and operational basis from the year-ago period. This figure is close to the upper-end of the company’s guidance range of $8.34–$8.39 billion and also exceeds the Zacks Consensus Estimate of $8.36 billion.
Organic revenue growth in the fourth quarter (excluding the impact of changes in foreign currency exchange rates and sales from the acquisitions of EndoChoice Holdings) was 10% year over year.
Geographically, in the fourth quarter, the company achieved 11% growth in the U.S. (up 11% operational; same organically), 3% growth in Europe (up 7%; same), up 17% in the Asia, Middle East and Africa (AMEA) region (up 13%; same) and 9% in the emerging markets (up 17%; same).
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 $585 million (up 12% year over year at CER) and $255 million (up 10%), respectively, during the fourth quarter.
The second largest contributor to Boston Scientific’s top line was Rhythm Management, which includes Cardiac Rhythm Management (CRM) and Electrophysiology. CRM reflected an 8% year-over-year increase in sales to $473 million at CER in the reported quarter.
Worldwide sales from pacemakers (within CRM) increased 24.2% to $154 million, while defibrillators were marginally up 0.9% to $319 million.
Electrophysiology sales went up 5% year over year at CER to $63 million.
Other segments like Endoscopy, Urology and Pelvic Health and Neuromodulation (coming under the MedSurg broader group) recorded sales of $380 million (up 10% at CER), $274 million (up 14%) and $161 million (up 16%), respectively.
Margins
Gross margin expanded 72 basis points (bps) year over year to 71.7% despite over 8% increase in cost of products sold. Adjusted operating margin expanded 267 bps to 21.2% in the reported quarter. During the quarter, selling, general and administrative expenses went up 6.9% to $831 million, while research and development expenses increased 4.9% to $256 million. Royalty expense increased 17.6% to $20 million.
Balance Sheet
Boston Scientific exited 2016 with cash and cash equivalents of $196 million, significantly down from $319 million at the end of 2015. At the end of 2016, the company had total long-term debt of $5.48 billion, a marginal reduction from $5.68 billion at the end of 2015.
Guidance
Boston Scientific has provided full year and first-quarter 2017 guidance.
The company expects 2017 revenues to be within the range of $8.68–$8.88 billion (annualized growth of 3% to 6% on reported basis and growth of 5% to 7% on operational basis including contribution of approximately 70 bps from EndoChoice). The current Zacks Consensus Estimate for revenues is $8.79 billion, within the guided range.
Adjusted EPS guidance for 2017 has been forecasted within the range of $1.22−$1.26. The Zacks Consensus Estimate of $1.10 is below the guidance range.
For the first quarter of 2017, adjusted earnings are expected in the band of 29–31 cents per share on revenues of $2.05–$2.10 billion. The Zacks Consensus Estimate for EPS stands at 30 cents, while that for revenues is $2.08 billion.
Our Take
Even amid challenging economic conditions, a competitive environment and severe currency headwinds, Boston Scientific posted a better-than-expected fourth quarter, with earnings and revenues both ahead of the Zacks Consensus Estimate. While foreign exchange headwinds continue 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 higher sales across all its geographies in the fourth quarter. Moreover, we are encouraged with the company gaining a number of approvals for its products, both in the domestic market and outside.
Among the recent developments, worth mentioning are two acquisitions viz. EndoChoice, enabling Boston Scientific to offer its infection control products, pathology services and single-use devices for treatment of gastrointestinal conditions and Neovasc to boost the company’s structural heart business. Also, the company’s Urology and Pelvic Health business should benefit from the purchase of Resectr Tissue Resection Device, a single-use solution designed to remove uterine polyps. Besides it added LumenR Tissue Retractor System to its Endoscopy business, which is currently in development for use during endoscopic resection of lesions in the colon.
Zacks Rank & Key Picks
Boston Scientific currently has a Zacks Rank #3 (Hold). Better-ranked medical stocks include Glaukos Corporation (GKOS - Free Report) , Cardiovascular Systems and Neogen Corp. (NEOG - Free Report) . Glaukos sports a Zacks Rank #1 (Strong Buy) while Cardiovascular Systems and Neogen carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Glaukos gained over 100% in the last one year in comparison to the S&P 500’s gain of only 19.2%. The company has a stellar four-quarter average earnings surprise of over 100%.
Cardiovascular Systems surged over 100% in the last one year in comparison to the S&P 500. It has a four-quarter average earnings surprise of 67.8%.
Neogen gained 27.1% in the past one year, better than the S&P 500 mark. The stock has an impressive long-term earnings growth of 16.7% for the next five years compared with the industry average of 15.2%.
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Boston Scientific (BSX) Tops Q4 Earnings, Offers 2017 View
Boston Scientific Corporation (BSX - Free Report) posted adjusted earnings per share (EPS) (after considering certain one-time adjustments other than amortization expense) of 21 cents in the fourth quarter of 2016, up 31.3% from the year-ago quarter.
However, considering amortized expense adjustments, the quarter’s adjusted EPS came in at 30 cents, up 15.4% from the year-ago adjusted number. The figure exceeded the Zacks Consensus Estimate by a penny and also remained ahead of the company's adjusted EPS guidance range of 27–29 cents.
Without these adjustments, the company reported earnings of 9 cents per share, against a loss of 11 cents a year ago.
Full-year adjusted earnings (including amortized expense) came in at $1.11 per share, a 19.3% improvement from the year-ago period. It also remained ahead of the company’s guidance range of $1.09−$1.11.
Boston Scientific Corporation Price, Consensus and EPS Surprise
Boston Scientific Corporation Price, Consensus and EPS Surprise | Boston Scientific Corporation Quote
Revenues in Detail
Revenues in the fourth quarter were up 11% year over year on both reported and operational basis (at constant exchange rate or CER) to $2.19 billion. The figure came in line with the upper end of the company’s guidance of $2.14–$2.19 billion and exceeded the Zacks Consensus Estimate of $2.16 billion.
Revenues for the full year were $8.38 billion, a 12% improvement on both reported and operational basis from the year-ago period. This figure is close to the upper-end of the company’s guidance range of $8.34–$8.39 billion and also exceeds the Zacks Consensus Estimate of $8.36 billion.
Organic revenue growth in the fourth quarter (excluding the impact of changes in foreign currency exchange rates and sales from the acquisitions of EndoChoice Holdings) was 10% year over year.
Geographically, in the fourth quarter, the company achieved 11% growth in the U.S. (up 11% operational; same organically), 3% growth in Europe (up 7%; same), up 17% in the Asia, Middle East and Africa (AMEA) region (up 13%; same) and 9% in the emerging markets (up 17%; same).
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 $585 million (up 12% year over year at CER) and $255 million (up 10%), respectively, during the fourth quarter.
The second largest contributor to Boston Scientific’s top line was Rhythm Management, which includes Cardiac Rhythm Management (CRM) and Electrophysiology. CRM reflected an 8% year-over-year increase in sales to $473 million at CER in the reported quarter.
Worldwide sales from pacemakers (within CRM) increased 24.2% to $154 million, while defibrillators were marginally up 0.9% to $319 million.
Electrophysiology sales went up 5% year over year at CER to $63 million.
Other segments like Endoscopy, Urology and Pelvic Health and Neuromodulation (coming under the MedSurg broader group) recorded sales of $380 million (up 10% at CER), $274 million (up 14%) and $161 million (up 16%), respectively.
Margins
Gross margin expanded 72 basis points (bps) year over year to 71.7% despite over 8% increase in cost of products sold. Adjusted operating margin expanded 267 bps to 21.2% in the reported quarter. During the quarter, selling, general and administrative expenses went up 6.9% to $831 million, while research and development expenses increased 4.9% to $256 million. Royalty expense increased 17.6% to $20 million.
Balance Sheet
Boston Scientific exited 2016 with cash and cash equivalents of $196 million, significantly down from $319 million at the end of 2015. At the end of 2016, the company had total long-term debt of $5.48 billion, a marginal reduction from $5.68 billion at the end of 2015.
Guidance
Boston Scientific has provided full year and first-quarter 2017 guidance.
The company expects 2017 revenues to be within the range of $8.68–$8.88 billion (annualized growth of 3% to 6% on reported basis and growth of 5% to 7% on operational basis including contribution of approximately 70 bps from EndoChoice). The current Zacks Consensus Estimate for revenues is $8.79 billion, within the guided range.
Adjusted EPS guidance for 2017 has been forecasted within the range of $1.22−$1.26. The Zacks Consensus Estimate of $1.10 is below the guidance range.
For the first quarter of 2017, adjusted earnings are expected in the band of 29–31 cents per share on revenues of $2.05–$2.10 billion. The Zacks Consensus Estimate for EPS stands at 30 cents, while that for revenues is $2.08 billion.
Our Take
Even amid challenging economic conditions, a competitive environment and severe currency headwinds, Boston Scientific posted a better-than-expected fourth quarter, with earnings and revenues both ahead of the Zacks Consensus Estimate. While foreign exchange headwinds continue 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 higher sales across all its geographies in the fourth quarter. Moreover, we are encouraged with the company gaining a number of approvals for its products, both in the domestic market and outside.
Among the recent developments, worth mentioning are two acquisitions viz. EndoChoice, enabling Boston Scientific to offer its infection control products, pathology services and single-use devices for treatment of gastrointestinal conditions and Neovasc to boost the company’s structural heart business. Also, the company’s Urology and Pelvic Health business should benefit from the purchase of Resectr Tissue Resection Device, a single-use solution designed to remove uterine polyps. Besides it added LumenR Tissue Retractor System to its Endoscopy business, which is currently in development for use during endoscopic resection of lesions in the colon.
Zacks Rank & Key Picks
Boston Scientific currently has a Zacks Rank #3 (Hold). Better-ranked medical stocks include Glaukos Corporation (GKOS - Free Report) , Cardiovascular Systems and Neogen Corp. (NEOG - Free Report) . Glaukos sports a Zacks Rank #1 (Strong Buy) while Cardiovascular Systems and Neogen carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Glaukos gained over 100% in the last one year in comparison to the S&P 500’s gain of only 19.2%. The company has a stellar four-quarter average earnings surprise of over 100%.
Cardiovascular Systems surged over 100% in the last one year in comparison to the S&P 500. It has a four-quarter average earnings surprise of 67.8%.
Neogen gained 27.1% in the past one year, better than the S&P 500 mark. The stock has an impressive long-term earnings growth of 16.7% for the next five years compared with the industry average of 15.2%.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>