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Will WATCHMAN Boost Boston Scientific's (BSX) Q4 Earnings?

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Boston Scientific Corporation (BSX - Free Report) is scheduled to report fourth-quarter and 2017 results before the opening bell on Feb 1.

Last quarter, the company delivered earnings in line with the Zacks Consensus Estimate. However, the average trailing four-quarter beat is pegged at 0.84%.

Let’s see how things are shaping up prior to this announcement.

Preliminary Results

On Jan 9, Boston Scientific announced an upbeat fourth-quarter 2017 preliminary sales performance. Year over year, preliminary net sales for the quarter has been forecast at $2.41 billion, up 9.9% on a reported basis, 8.1% on an operational basis (at constant exchange rate or CER) and approximately, 6.8% on an organic basis. This reported preliminary revenue figure lies above the Zacks Consensus Estimate of $2.35 billion.

Notably, organic revenue growth excludes the impact of changes in foreign currency exchange rates as well as sales from the recent acquisitions of EndoChoice Holdings and Symetis SA.

For 2017, the company has announced preliminary net sales of $9.05 billion, reflecting 7.9% growth on a reported basis, 7.8% increase on operational basis and a 6.6% rise on an organic basis compared with the prior-year number. The company’s preliminary tally again compares favorably with the Zacks Consensus Estimate of $8.99 billion.

Key Catalysts

 

We are optimistic about the company’s gradually improving performance in Interventional Cardiology (IC), led by an innovative portfolio and robust commercial teams, globally. More specifically, the company has of late successfully gained within this business on strong sales of WATCHMAN Left Atrial Appendage Closure device and its portfolio of complex PCI products.

The WATCHMAN platform is expected to experience another excellent quarter on consistent global momentum as Boston Scientific’s multiple market development efforts continue to push for growth. In this regard, Medicare reimbursement rates for DRG 274 increased by an average of 10.6% effective Oct 1, under which, 93% of WATCHMAN implants fall.

All these developments are expected to have significantly boosted the IC business in the fourth quarter itself. The company earlier stated that it expects to end 2017 with more than 375 accounts implanting WATCHMAN and increased reorder rates in previously opened accounts.

However, ahead of the company’s earnings release for the fourth quarter, we believe its IC business to be grossly impacted by the product recall issue within Europe. Notably, in February 2017, the company recalled one of its prime products, the Lotus range of heart devices from Europe, due to device malfunctions. The company also delayed submission of its U.S. marketing application for its Lotus Edge device.

Recently, the company has announced a further delay in its earlier-reported timelines for the commercial return of the LOTUS Edge Aortic Valve System in Europe as well as the United States. Notably, while recalling the product last February, Boston Scientific announced the expected time of reintroduction of the LOTUS Edge delivery system in Europe by the first quarter of 2018. The company also expected to file the final Pre-Market Approval (PMA) module with the U.S. Food and Drug Administration by January 2018.

However, per the latest press release, the company is likely to provide a further update on the status of the LOTUS Edge Valve on Feb 1, 2018. This delay has been justified by Boston Scientific citing its continuous focus on manufacturing and regulatory milestones to support the long-term success of the Lotus platform. The company stated that it is working hard to implement necessary modifications in the device to pass the internal quality standards.

However, this extra delay might lead to a further setback for the company’s fast-growing transcatheter aortic valve replacement business within the IC in the soon-to-be-reported quarter.

The Zacks Consensus Estimate for fourth-quarter IC revenues is pegged at $622 million, a 6.3% higher than the year-ago reported number of $585 million.

Other Factors at Play

Among the segments, MedSurg is estimated to demonstrate a steady performance, led by endoscopy. Urology and Women’s Health are also projected to grow beyond market levels, driven by investment strategies in key international geographies.

The Zacks Consensus Estimate for fourth-quarter endoscopy revenues is pegged at $417 million, 9.7% above the prior-year quarter’s reported count of $380 million. For Urology and Women’s Health, the consensus mark of $303 million remains 10.5% ahead of the year-earlier quarter’s reported tally of $274 million.

On the flip side, severe currency headwinds that Boston Scientific has been facing of late remain a concern. In fact, as the company records 47% of its sales from the international markets, it gets highly exposed to currency fluctuations. For the full year, Boston Scientific predicts an unfavorable foreign exchange challenge to the tune of 700 basis points or 8 cents per share on earnings.

Here’s What Our Quantitative Model Predicts:

Boston Scientific does not have the right combination of the two main ingredients — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for increasing the odds of an earnings beat.

Zacks ESP: Boston Scientific has an Earnings ESP of 0.00%, which makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Boston Scientific carries a Zacks Rank #4 (Sell), which lowers the predictive power of ESP.

Stocks Worth a Look

Here are a few medical stocks worth considering with the right combination of elements to beat on earnings this quarter.

Bio-Rad Laboratories (BIO - Free Report) has an Earnings ESP of +4.45% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Myriad Genetics (MYGN - Free Report) has an Earnings ESP of +0.42% and a Zacks Rank #3.

Henry Schein (HSIC - Free Report) has an Earnings ESP of +0.09% and is a Zacks #3 Ranked player.

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