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Boston Scientific (BSX) Q3 Earnings Top Estimates, Margins Up

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Boston Scientific Corporation (BSX - Free Report) posted adjusted earnings per share (EPS) of 41 cents for the third quarter of 2021, which marked a 10.8% rise from the year-ago figure. The figure topped the Zacks Consensus Estimate by a penny and matched the upper end of the adjusted earnings per share guidance range of 39-41 cents. The quarter’s adjustments included certain amortization expenses, asset impairment charges, litigation-related charges, acquisition/divestitures-related net charges and investment portfolio net losses, among others.

Reported EPS in the third quarter was 28 cents against loss of 12 cents per share in the year-ago quarter.

Revenues of $2.93 billion in the third quarter improved 10.3% year over year on a reported basis and 9.7% on an operational basis (at constant exchange rate or CER). Revenues grew 10.6% on an organic basis (adjusted for foreign currency fluctuations and certain recent acquisitions and divestments). The top line, however, missed the Zacks Consensus Estimate by 1.6%.

The top line also lagged third-quarter revenue growth guidance of approximately 12-14% on both reported and organic basis.

Q3 Revenues in Detail

In the third quarter, revenues rose 15.4% in the United States on a reported basis (same operationally). Revenues were up 9.3% in the Europe, Middle East and Africa region (up 7.9%); 9.5% in the Asia Pacific zone (up 8.2%); 28.8% in Latin America and Canada (up 24.7%) and 21.9% in emerging markets (up 17.8%).

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 $744 million (up 26% year over year organically) and $452 million (up 8.1%), respectively, in the third quarter.

Boston Scientific's Rhythm and Neuro business comprises Cardiac Rhythm Management (CRM), Electrophysiology and Neuromodulation. CRM reflected a 31.2% year-over-year drop in organic sales to $512 million in the reported quarter.

Electrophysiology sales grew 10.4% year over year organically to $86 million.

Neuromodulation sales rose 2.1% year over year on an organic basis to $221 million.

Other segments like Endoscopy plus Urology and Pelvic Health (under the MedSurg broader group) recorded sales of $533 million (up 11.4% organically) and $384 million (up 6.6%), respectively.

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

The Q3 segmental revenue growth reflected a strong sequential decline from the previously-reported quarter.

Margins

Gross margin in the third quarter expanded 199 basis points (bps) year over year to 69.3%. There was a 3.6% rise in the cost of products sold to $900 million.

Selling, general and administrative expenses rose 8.3% to $1.07 billion. Research and development expenses fell 1.6% to $310 million. Royalty expenses of $14 million increased 16.7% year over year. Adjusted operating margin improved 388 bps to 21.9% in the reported quarter.

Guidance Updated

Full-year net sales growth is now expected in the range of 19-20% on a reported basis and 18-19% on an organic basis (earlier guidance was growth of 21-22% on a reported basis and 19-20% on an organic basis).

The lower-end of the adjusted EPS guidance has been raised now to $1.60-$1.62 (earlier range was $1.58-$1.62).

The current Zacks Consensus Estimate for 2021 earnings and revenues is pegged at $1.61 and $12 billion, respectively.

For the fourth quarter of 2021, revenue growth is projected in the range of approximately 13-17% on a reported basis (an expected growth of 12-16% organically). Adjusted earnings are expected in the range of 43-45 cents per share. The current Zacks Consensus Estimate for fourth-quarter earnings and revenues is pegged at 45 cents and $3.19 billion, respectively.

Our Take

Boston Scientific ended the third quarter on a mixed note with adjusted earnings surpassing the Zacks Consensus Estimate but revenues missing the same.  While the company registered a year-over-year improvement in sales, revenues dropped sequentially.

Barring CRM, organic revenues at each of its core business segments and geographies were up in the reported quarter. The company also reported margin expansions on a year-over-year basis. However, the decline in R&D expense is concerning.

Zacks Rank and Stocks to Consider

Boston Scientific currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader medical space that have announced quarterly results are Quest Diagnostics Incorporated (DGX - Free Report) , Abbott Laboratories (ABT - Free Report) , and HCA Healthcare, Inc. (HCA - Free Report) . Quest Diagnostics, carrying a Zacks Rank #2 (Buy), reported third-quarter 2021 adjusted EPS of $3.96, which beat the Zacks Consensus Estimate by 33.8%. Third-quarter revenues of $2.77 billion outpaced the consensus mark by 12.6%.

Abbott reported third-quarter 2021 adjusted EPS of $1.40, which surpassed the Zacks Consensus Estimate by 52.2%. Third-quarter revenues of $10.93 billion outpaced the Zacks Consensus Estimate by 15.3%. It currently carries a Zacks Rank #2.

HCA Healthcare, currently carrying a Zacks Rank #2, reported third-quarter 2021 adjusted EPS of $4.57, surpassing the Zacks Consensus Estimate by 11.5%. Revenues of $15.28 billion surpassed the Zacks Consensus Estimate by 4.7%.