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Boston Scientific (BSX) Q2 Earnings Beat, 2021 Guidance Up

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Boston Scientific Corporation (BSX - Free Report) posted adjusted earnings per share (EPS) of 40 cents for the second quarter of 2021, which marked a 400% surge from the year-ago figure. The figure topped the Zacks Consensus Estimate by 8.1% and also exceeded the adjusted earnings per share guidance range of 36 cents to 38 cents. The quarter’s adjustments include certain amortization expenses, litigation-related charges, acquisition/divestitures-related net charges and investment portfolio net losses among others.

Reported earnings in the second quarter were 12 cents per share against the year-ago loss of 11 cents per share.

Revenues of $3.08 billion in the second quarter improved 53.6% year over year on a reported basis and 49.6% on an operational basis (at constant exchange rate or CER). Revenues grew 52.4% on an organic basis (adjusted for foreign currency fluctuations and certain recent acquisitions and divestments). The top line exceeded the Zacks Consensus Estimate by 4.4%.

The top line also exceeded second-quarter revenue growth guidance of approximately 46-50% on a reported basis and 44-48% on an organic basis.

Q2 Revenues in Detail

In the second quarter, revenues rose 70.1% in the United States on a reported basis (same operationally). Revenues were up 59.3% in the Europe, Middle East and Africa region (up 47.1%); 27% in the Asia Pacific zone (up 21.1%); 86.1% in Latin America and Canada (up 73.9%) and 33.8% in emerging markets (up 25.8%).

Segmental Analysis

Boston Scientific currently has three global reportable segments: Cardiovascular, Rhythm and Neuro plus MedSurg.

The company generates maximum revenues from Cardiovascular. Sales from its sub segments, namely Interventional Cardiology and Peripheral Interventions were $790 million (up 55.2% year over year organically) and $473 million (up 35.6%), respectively, in the second quarter.

Boston Scientific's Rhythm and Neuro business comprises Cardiac Rhythm Management (CRM), Electrophysiology and Neuromodulation. CRM reflected a 31.2% year-over-year rise in organic sales to $524 million in the reported quarter.

Electrophysiology sales grew 78.7% year over year organically to $95 million.

Neuromodulation sales rose 98% year over year on an organic basis to $247 million.

Other segments like Endoscopy plus Urology and Pelvic Health (under the MedSurg broader group) recorded sales of $551 million (up 54.1% organically) and $397 million (up 70.8%), respectively.

On Mar 1, 2021, Boston Scientific completed the sale of its Specialty Pharmaceuticals segment.

Margins

Gross margin in the second quarter expanded 878 basis points (bps) year over year to 69.3%. There was a 19.5% rise in the cost of products sold to $945 million.

Selling, general and administrative expenses rose 40.4% to $1.12 billion. Research and development expenses increased 23.1% to $298 million. Meanwhile, royalty expenses of $12 million increased 50% year over year. Adjusted operating margin improved 1459 bps to 22.8% in the reported quarter.

Guidance

Based on robust second-quarter results, the company increased its full-year 2021 guidance.

Full-year net sales growth is expected in the range of 21-22% on a reported basis and 19-20% on an organic basis (earlier guidance was expected growth of 16-19% on a reported basis and 15-18% on an organic basis). Adjusted EPS is expected in the range of $1.58-$1.62 (earlier range was $1.53-$1.60). The current Zacks Consensus Estimate for 2021 earnings and revenues is pegged at $1.58 and $11.74 billion, respectively.

For the third quarter of 2021, revenue growth is projected in the range of approximately 12-14% on both reported and organic basis. Adjusted earnings are expected in the range of 39-41 cents per share. The current Zacks Consensus Estimate for third-quarter earnings and revenues is pegged at 40 cents and $2.97 billion, respectively.

Our Take

Boston Scientific ended the second quarter on an extremely bullish note with adjusted earnings and revenues surpassing the respective Zacks Consensus Estimate as well as the company’s expectations by a wide margin.  The company also registered strong sequential and year-over-year improvement in overall financial performance.

Organic revenues at each of its core business segments and geographies were up in the reported quarter. Despite a formidable increase in costs and expenses, the company reported margin expansions in the quarter. The increased full-year 2021 guidance also looks impressive.

Zacks Rank and Stocks to Consider

Boston Scientific currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the same space are AMN Healthcare Services Inc (AMN - Free Report) , Catalent, Inc. (CTLT - Free Report) and Align Technology, Inc. (ALGN - Free Report) .

The Zacks Consensus Estimate for AMN Healthcare’s second-quarter 2021 adjusted EPS is currently pegged at $1.47. The consensus estimate for second-quarter revenues is pegged at $829.4 million. The company currently carries a Zacks Rank #2 (Buy).

Catalent currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for its fourth-quarter fiscal 2021 adjusted EPS is currently pegged at $1.04. The consensus estimate for fourth-quarter revenues is pegged at $1.13 billion. You can see the complete list of today’s Zacks #1 Rank stocks here.

Align Technology currently carries a Zacks Rank #2. The Zacks Consensus Estimate for its second-quarter 2021 adjusted EPS is currently pegged at $2.56. The consensus estimate for its revenues stands at $937.5 million.