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Boston Scientific (BSX) Q2 Earnings Beat, Margins Improve
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Boston Scientific Corporation (BSX - Free Report) posted adjusted earnings per share (EPS) of 53 cents for the second quarter of 2023, up 20.5% from the year-ago figure. The figure also exceeded the Zacks Consensus Estimate by 8.2%. The figure exceeded the company’s adjusted earnings per share guidance range of 48-50 cents.
The quarter’s adjustments included certain amortization expenses, acquisition/divestitures-related net charges, certain asset impairment charges and European Union Medical Device Regulation implementation costs, among others.
Reported EPS for the second quarter was 18 cents, reflecting an improvement of a penny from the year-ago quarter figure.
Second-quarter revenues of $3.59 billion improved 11% year over year on a reported basis and 12% on an operational basis (at a constant exchange rate or CER). Revenues grew 11.6% on an organic basis (adjusted for foreign currency fluctuations and certain recent acquisitions and divestments). The top line exceeded the Zacks Consensus Estimate by 2.6%. The quarter’s top-line performance also exceeded the company’s projection of 6.5-8.5% growth on a reported basis (an increase of 7-9% organically).
Q2 Revenues in Detail
In the second quarter, revenues rose 9.1% in the United States on a reported basis (same operationally). This compares to our model estimate of 4.7% growth year over year on a reported and operational basis.
Revenues were up 9.6% in the Europe, Middle East and Africa (EMEA) region (up 9.3%) and up 18% in the Asia Pacific zone (up 24.5%). The revenue growth projection for EMEA was 10.2% on a reported basis (a projected improvement of 14.7% operationally) per our model. The same for APAC was 13.6% on a reported basis and 17.9% operationally.
Revenues increased 16.9% in Latin America and Canada (up 17.4%). For Latin America and Canada, our estimate was pegged at 8.4% year-over-year reported growth for Q2 (an improvement of 9% operationally).
Reported revenue growth reported revenue growth in emerging markets was 18.8% (up 24.2% operationally).
Boston Scientific Corporation Price, Consensus and EPS Surprise
Boston Scientific recently reorganized its operational structure and aggregated its core businesses, each of which generates revenues from the sale of Medical Devices, into two reportable segments, MedSurg and Cardiovascular.
The company generates maximum revenues from Cardiovascular. Sales from its sub-segments, Cardiology and Peripheral Interventions, were $1.70 billion (up 13.4% year over year organically) and $535 million (up 13.5%), respectively, in the second quarter.
Going by our model, second-quarter Cardiology revenues were estimated to be $1.61 billion, implying 20.5% organic growth on a year-over-year basis. Our estimate for Peripheral Interventions revenues was pegged at $546.7 million, implying 17.3% organic growth.
Within MedSurg, Endoscopy generated revenues of $631 million, up 11.6% organically. Our model predicted revenues of $610.1 million, suggesting 10.4% organic growth.
Urology revenues were $485 million, reflecting organic growth of 8.4%. Our model estimated revenues to be $465.2 million, implying 4.5% organic growth.
Neuromodulation within MedSurg reported $244 million in revenues, reflecting a 2.8% rise organically year over year. Our model estimate was $253 million, indicating 6.9% organic growth.
Margins
Gross margin in the second quarter expanded 177 basis points (bps) year over year to 70.6%. There was a 13.8% rise in gross profit to $2.54 billion.
Selling, general and administrative expenses rose 16.2% to $1.35 billion. Research and development expenses rose 7.2% to $359 million. Royalty expenses of $12 million improved 9.1% year over year. Adjusted operating margin expanded 42 bps to 22.7% in the reported quarter.
2023 Guidance
Boston Scientific updated its full-year guidance and provided third-quarter 2023 projections.
Full-year net sales growth is expected in the range of 10.5-11.5% on a reported basis (earlier estimate was 8.5-10.5% growth). Net sales growth is expected to be in the range of 10-11% on an organic basis (8-10%). The Zacks Consensus Estimate is currently pegged at $13.91 billion, indicating a 9.7% rise from the 2022 reported figure. Full-year adjusted EPS is expected in the range of $1.96 to $2.00 ($1.90 to $1.96). The Zacks Consensus Estimate is currently pegged at $1.95, below the guided range.
For the third quarter of 2023, revenue growth is projected in the range of approximately 8.5-10.5% on a reported basis (an increase of 7-9% organically). Adjusted earnings are expected in the range of 46-48 cents per share. The current Zacks Consensus Estimate for third-quarter earnings and revenues is pegged at 48 cents and $3.43 billion, respectively.
Our Take
Boston Scientific second-quarter 2023 adjusted earnings and revenues exceeded the respective Zacks Consensus Estimate by decent margins. The company registered a strong year-over-year improvement in organic sales, indicating a solid rebound in the legacy business even amid several macroeconomic issues.
Organic and operational revenues at its respective core business segments and geographies were up in the reported quarter. However, mounting operating expenses put pressure on the company’s bottom line.
The increased 2023 guidance increases investors’ confidence, indicating that the company is well-poised to handle the industry-wise trend of currency headwinds and global inflationary pressure.
Zacks Rank and Key Picks
Boston Scientific currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories (ABT - Free Report) , Elevance Health, Inc. (ELV - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
Abbott, carrying a Zacks Rank of 2, reported second-quarter 2023 adjusted EPS of $1.08, beating the Zacks Consensus Estimate by 3.8%. Revenues of $9.98 billion outpaced the consensus mark by 2.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 12.4%.
Elevance Health reported second-quarter 2023 adjusted EPS of $9.04, beating the Zacks Consensus Estimate by 2.5%. Revenues of $43.38 billion surpassed the Zacks Consensus Estimate by 4.5%. It currently carries a Zacks Rank #2.
Elevance Health has a long-term estimated growth rate of 12.1%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 2.8%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 14.5%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.2%.
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Boston Scientific (BSX) Q2 Earnings Beat, Margins Improve
Boston Scientific Corporation (BSX - Free Report) posted adjusted earnings per share (EPS) of 53 cents for the second quarter of 2023, up 20.5% from the year-ago figure. The figure also exceeded the Zacks Consensus Estimate by 8.2%. The figure exceeded the company’s adjusted earnings per share guidance range of 48-50 cents.
The quarter’s adjustments included certain amortization expenses, acquisition/divestitures-related net charges, certain asset impairment charges and European Union Medical Device Regulation implementation costs, among others.
Reported EPS for the second quarter was 18 cents, reflecting an improvement of a penny from the year-ago quarter figure.
Second-quarter revenues of $3.59 billion improved 11% year over year on a reported basis and 12% on an operational basis (at a constant exchange rate or CER). Revenues grew 11.6% on an organic basis (adjusted for foreign currency fluctuations and certain recent acquisitions and divestments). The top line exceeded the Zacks Consensus Estimate by 2.6%. The quarter’s top-line performance also exceeded the company’s projection of 6.5-8.5% growth on a reported basis (an increase of 7-9% organically).
Q2 Revenues in Detail
In the second quarter, revenues rose 9.1% in the United States on a reported basis (same operationally). This compares to our model estimate of 4.7% growth year over year on a reported and operational basis.
Revenues were up 9.6% in the Europe, Middle East and Africa (EMEA) region (up 9.3%) and up 18% in the Asia Pacific zone (up 24.5%). The revenue growth projection for EMEA was 10.2% on a reported basis (a projected improvement of 14.7% operationally) per our model. The same for APAC was 13.6% on a reported basis and 17.9% operationally.
Revenues increased 16.9% in Latin America and Canada (up 17.4%). For Latin America and Canada, our estimate was pegged at 8.4% year-over-year reported growth for Q2 (an improvement of 9% operationally).
Reported revenue growth reported revenue growth in emerging markets was 18.8% (up 24.2% operationally).
Boston Scientific Corporation Price, Consensus and EPS Surprise
Boston Scientific Corporation price-consensus-eps-surprise-chart | Boston Scientific Corporation Quote
Segmental Analysis
Boston Scientific recently reorganized its operational structure and aggregated its core businesses, each of which generates revenues from the sale of Medical Devices, into two reportable segments, MedSurg and Cardiovascular.
The company generates maximum revenues from Cardiovascular. Sales from its sub-segments, Cardiology and Peripheral Interventions, were $1.70 billion (up 13.4% year over year organically) and $535 million (up 13.5%), respectively, in the second quarter.
Going by our model, second-quarter Cardiology revenues were estimated to be $1.61 billion, implying 20.5% organic growth on a year-over-year basis. Our estimate for Peripheral Interventions revenues was pegged at $546.7 million, implying 17.3% organic growth.
Within MedSurg, Endoscopy generated revenues of $631 million, up 11.6% organically. Our model predicted revenues of $610.1 million, suggesting 10.4% organic growth.
Urology revenues were $485 million, reflecting organic growth of 8.4%. Our model estimated revenues to be $465.2 million, implying 4.5% organic growth.
Neuromodulation within MedSurg reported $244 million in revenues, reflecting a 2.8% rise organically year over year. Our model estimate was $253 million, indicating 6.9% organic growth.
Margins
Gross margin in the second quarter expanded 177 basis points (bps) year over year to 70.6%. There was a 13.8% rise in gross profit to $2.54 billion.
Selling, general and administrative expenses rose 16.2% to $1.35 billion. Research and development expenses rose 7.2% to $359 million. Royalty expenses of $12 million improved 9.1% year over year. Adjusted operating margin expanded 42 bps to 22.7% in the reported quarter.
2023 Guidance
Boston Scientific updated its full-year guidance and provided third-quarter 2023 projections.
Full-year net sales growth is expected in the range of 10.5-11.5% on a reported basis (earlier estimate was 8.5-10.5% growth). Net sales growth is expected to be in the range of 10-11% on an organic basis (8-10%). The Zacks Consensus Estimate is currently pegged at $13.91 billion, indicating a 9.7% rise from the 2022 reported figure. Full-year adjusted EPS is expected in the range of $1.96 to $2.00 ($1.90 to $1.96). The Zacks Consensus Estimate is currently pegged at $1.95, below the guided range.
For the third quarter of 2023, revenue growth is projected in the range of approximately 8.5-10.5% on a reported basis (an increase of 7-9% organically). Adjusted earnings are expected in the range of 46-48 cents per share. The current Zacks Consensus Estimate for third-quarter earnings and revenues is pegged at 48 cents and $3.43 billion, respectively.
Our Take
Boston Scientific second-quarter 2023 adjusted earnings and revenues exceeded the respective Zacks Consensus Estimate by decent margins. The company registered a strong year-over-year improvement in organic sales, indicating a solid rebound in the legacy business even amid several macroeconomic issues.
Organic and operational revenues at its respective core business segments and geographies were up in the reported quarter. However, mounting operating expenses put pressure on the company’s bottom line.
The increased 2023 guidance increases investors’ confidence, indicating that the company is well-poised to handle the industry-wise trend of currency headwinds and global inflationary pressure.
Zacks Rank and Key Picks
Boston Scientific currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories (ABT - Free Report) , Elevance Health, Inc. (ELV - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
Abbott, carrying a Zacks Rank of 2, reported second-quarter 2023 adjusted EPS of $1.08, beating the Zacks Consensus Estimate by 3.8%. Revenues of $9.98 billion outpaced the consensus mark by 2.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 12.4%.
Elevance Health reported second-quarter 2023 adjusted EPS of $9.04, beating the Zacks Consensus Estimate by 2.5%. Revenues of $43.38 billion surpassed the Zacks Consensus Estimate by 4.5%. It currently carries a Zacks Rank #2.
Elevance Health has a long-term estimated growth rate of 12.1%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 2.8%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 14.5%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.2%.