BSX Surpasses Estimates

Boston Scientific Corporation (BSX - Analyst Report) yesterday reported financial results for the third quarter of fiscal 2009 after the market close. Earnings per share were 19 cents, beating the Zacks Consensus Estimate by 5 cents and the year-ago earnings by 3 cents.

Sales

Net sales in the quarter were $2.0 billion, increasing approximately 2% year over year. Excluding an unfavorable foreign currency translation (FX), net sales increased roughly 3% year over year. On a geographic basis, U.S. sales contributed roughly 58% of total revenues and increased 4% year over year. International sales increased 2% year over year.

Growth in net sales can be attributed to higher demand for the company’s Cardiac Rhythm Management (CRM), Endosurgery and Neuromodulation products, with revenues increasing 6%, 8%, and 21%, respectively, in these segments. This was partly offset by lower sales of Cardiovascular, Neurovascular and Electrophysiology products.

In the CRM space, the company reported higher sales of ICDs and pacemakers. Boston Scientific maintains its leadership position in the drug-eluting stent (DES) market with a 41% global market share. DES revenues increased roughly 4% year over year in the reported quarter.

Margins

Boston reported a strong expansion in margins primarily due to lower costs. Gross margin increased 200 basis points (bps) year over year to 68.9%. Operating margin increased 1,560 bps year over year to 17.0%. Higher gross and operating margins had resulted in increasing the net margin 1,300 bps year over year to 9.9%.

Balance Sheet

Boston ended the quarter with cash and cash equivalents of roughly $1.4 billion. The company prepaid $225 million of term loan debt in the reported quarter. As a result, its debt balance stood at approximately $6.0 billion at the end of the quarter.

Outlook

Boston has provided guidance for the fourth quarter and full fiscal 2009. For the fourth quarter, net sales are estimated between $2.025 and $2.125 billion. Earnings per share should range between 17 and 21 cents.

For fiscal 2009, net sales are estimated between $8.134 and $8.234 billion. Earnings per share should range between 75 and 79 cents.

Boston Scientific Corporation is a manufacturer of medical devices and products used in a broad range of interventional medical specialties. The company faces significant competition across its product portfolio. The primary competitors include Johnson & Johnson (JNJ - Analyst Report), Medtronic Inc. (MDT - Analyst Report), Abbott Laboratories (ABT - Analyst Report) and St. Jude Medical Inc. (STJ - Analyst Report).

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