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Will Boston Scientific (BSX) Surprise this Earnings Season?

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Boston Scientific Corporation (BSX - Free Report) is scheduled to report first-quarter 2017 results before the opening bell on Apr 27. Last quarter, the company’s earnings topped the Zacks Consensus Estimate by 3.45%. Also, it posted an average beat of 5.03% in the trailing four quarters. Let’s see how things are shaping up prior to this announcement.

Factors at Play

Banking on a strong global team, perfect execution of long-term strategic plans including portfolio expansion, globalization efforts and investments into fast-growth markets, Boston Scientific expects its solid performance trend to continue in the first quarter and beyond.

This is in line with the company’s strong 2017 guidance for revenues and adjusted EPS (earnings per share). The company expects 2017 revenues to register annualized growth of 3% to 6% on a reported basis and rise of 5% to 7% on operational basis, including contribution of approximately 70 basis points (bps) from EndoChoice. The current Zacks Consensus Estimate for revenues is $8.78 billion, within the guided range.

Adjusted EPS guidance for 2017 is forecasted in the range of $1.22−$1.26. The Zacks Consensus Estimate of $1.24 is also within the range.

For the first quarter, adjusted earnings are expected in the band of 29 cents–31 cents per share on revenues of $2.05–$2.10 billion. The Zacks Consensus Estimate for EPS is 30 cents and for revenues is $2.08 billion.

Given Boston Scientific’s tenth successive quarters of improvement in adjusted operating margin and raised guidance, we expect another quarter of strong sequential growth with further improvement in the Rhythm Management segment. Boston Scientific continues to expect full-year 2017 adjusted operating margin of 25% in 2017, with plans to deliver an additional 300 bps of expansion by 2020 to 28%.

We are also optimistic about the company’s gradually improving performance in Interventional Cardiology, led by an innovative portfolio and robust commercial teams globally. It is consistently gaining share in a number of cardiovascular segments and DES, as a differentiated platform of premier and synergy continues to build momentum and gain share globally.

Meanwhile, MedSurg is expected to demonstrate consistent performance, led by endoscopy. Urology and Women's Health are also estimated to grow beyond market levels driven by investment strategies in key international geographies.

However, the severe currency headwinds that Boston Scientific has been facing lately remain a concern. We note that as the company records 47% of its sales from the international markets, it remains highly exposed to currency fluctuations. In 2017, Boston Scientific expects unfavorable foreign exchange headwind to the tune of $125 million on revenues and 700 bps or 8 cents per share on earnings. Adjusted gross margin for the full year assumes a negative foreign exchange impact of 50 bps.

We are also concerned with the still sluggish defibrillator performance within the company’s core CRM segment. These apart, strong competitors in the large medical device market also pose a tough challenge for Boston Scientific.

Earnings Whispers

Our proven model does not conclusively show that Boston Scientific is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Boston Scientific’s Earnings ESP is 0.00% since both the Most Accurate estimate and the Zacks Consensus Estimate stand at 30 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Boston Scientific has a Zacks Rank #4 (Sell).

As it is we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are three companies you may want to consider as our proven model shows they have the right combination of elements to post an earnings beat this quarter:  

Becton, Dickinson and Company (BDX - Free Report) has an Earnings ESP of +0.45% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.

Humana Inc. (HUM - Free Report) has an Earnings ESP of +2.06% and a Zacks Rank #2.

Hill-Rom Holdings, Inc. (HRC - Free Report) has an Earnings ESP of +1.27% and a Zacks Rank #2.

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