A month has gone by since the last earnings report for Boston Scientific Corporation (BSX - Free Report) . Shares have added about 3.5% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is BSX due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Boston Scientific posted adjusted earnings per share (EPS) of 33 cents in the first quarter of 2018, up 13.8% from the year-ago quarter. Earnings also surpassed the Zacks Consensus Estimate of 31 cents. Further, adjusted EPS exceeded the company's guided range of 30-32 cents.
The company reported EPS of 21 cents was in line with the year-ago quarter.
Revenues in Detail
Revenues in the first quarter were up 10.1% year over year on a reported basis and up 6.2% on operational basis (at constant exchange rate or CER) to $2.38 billion. The revenue figure exceeded the Zacks Consensus Estimate of $2.34 billion.
Organic revenue growth in the first quarter (excluding the impact of changes in foreign currency exchange rates and sales from the acquisitions of Symetis SA) was 5.2% year over year.
Geographically, in the first quarter, the company achieved 4.8% operational growth in the United States (same organically), up 10% in Europe, Middle East and Africa region (up 5.7%); up 5.8% in the Asia Pacific region (same), up 9.5% in Latin America and Canada (up 8.6%) and up 17.2% in the emerging markets (up 16.7%).
Boston Scientific currently has three global reportable segments: Cardiovascular, Rhythm and Neuro and MedSurg.
The company generates maximum revenues from Cardiovascular. Sales from its subsegments — Interventional Cardiology and Peripheral Interventions — were $645 million (up 1.3% year over year organically) and $288 million (up 6%), respectively, during the first quarter.
The second largest contributor to Boston Scientific's top line was the Rhythm and Neuro business, comprising Cardiac Rhythm Management (CRM), Electrophysiology and Neuromodulation. CRM reflected a 2.4% year-over-year increase in organic sales to $493 million in the reported quarter.
Electrophysiology sales went up 11.5% year over year organically to $75 million.
Neuromodulation sales rose 17.2% year over year organically to $169 million.
Other segments like Endoscopy and Urology and Pelvic Health (under the MedSurg broader group) recorded sales of $418 million (up 6.2% organically) and $293 million (up 9.2%) respectively.
Gross margin in the first quarter expanded 190 basis points (bps) year over year to 71.8% on 3.4% rise in cost of products sold. Adjusted operating margin improved 240 bps to 23.9% in the reported quarter. During the quarter, selling, general and administrative expenses went up 8.3% to $860 million while research and development expenses rose 11.1% to $261 million. Royalty expenses inched up 5.9% to $18 million in the quarter.
Boston Scientific has provided an updated guidance for 2018. The company projects current-year revenues in the range of $9.750-$9.900 billion, compared with the previous $9.650-$9.800 billion (annualized growth of 8-10% on a reported basis and 5-7% on an organic basis (at CER and including contribution of approximately 40 bps from Symetis). The Zacks Consensus Estimate for current-year revenues is pegged at $9.74 billion, below the guided range.
Adjusted EPS guidance for 2018 is estimated in the range of $1.37-$1.41 as compared with the previous range of $1.35-$1.39. The Zacks Consensus Estimate of $1.37 is pegged at the low end of the guided band.
The company also provided its second-quarter 2018 financial outlook. Adjusted EPS are expected in the band of 33-35 cents on revenues of $2.450-$2.500 billion. The consensus mark for EPS stands at 35 cents while the same for revenues is at $2.44 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to eight lower.
At this time, BSX has a subpar Growth Score of D, a grade with the same score on the momentum front. The stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, BSX has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.