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Boston Scientific (BSX) Up 1.9% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Boston Scientific (BSX - Free Report) . Shares have added about 1.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Boston Scientific due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Boston Scientific Sees Growth In All Lines and Geographies in Q4

Boston Scientific posted adjusted earnings per share (EPS) of 39 cents in the fourth quarter of 2018, up 14.7% from the year-ago quarter. Earnings surpassed the Zacks Consensus Estimate of 37 cents. Further, adjusted EPS exceeded the company's guided range of 30-32 cents.

Reported EPS for the forth quarter was 27 cents in comparison with loss of 45 cents per share in the year-ago quarter.

Full-year adjusted EPS came in at $1.47, a 16.7% improvement from the year-ago period. This also surpassed the Zacks Consensus Estimate of $1.39 as well as the company-provided guidance of $1.38-$1.40.

Revenues in Detail

Revenues in the fourth quarter were up 6.4% year over year on a reported basis, up 8.2% on an operational basis (at constant exchange rate or CER) and up 7% on an organic basis (adjusted for foreign currency fluctuations and certain recent acquisitions) to $2.56 billion. Revenues exceeded the Zacks Consensus Estimate by 0.11%.

For the year 2018, revenues were $9.82 billion, up 8.6% on a reported basis (up 8% on an operational basis and up 7.2% on an organic basis).

In the fourth quarter, the company achieved 7% growth in the United States on a reported basis (same operationally), 5.1% rise in Europe, Middle East and Africa region (up 9.2%); up 5.2% in the Asia Pacific region (up 7.1%), up 7.2% in Latin America and Canada (up 22.2%) and up 16.8% in the emerging markets (up 27.2%).

Segment Analysis

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 $668 million (up 6.1% year over year organically) and $302 million (up 11.2%), respectively in the fourth quarter.

Boston Scientific's Rhythm and Neuro business comprises Cardiac Rhythm Management (CRM), Electrophysiology and Neuromodulation. CRM reflected an 1.7% year-over-year increase in organic sales to $488 million in the reported quarter.

Electrophysiology sales went up 8% year over year organically to $81 million.

Neuromodulation sales rose 18.9% year over year organically to $220 million.

Other segments like Endoscopy and Urology and Pelvic Health (under the MedSurg broader group) recorded sales of $458 million (up 6.6% organically) and $342 million (up 5.6%), respectively.

Margins

Gross margin in the fourth quarter contracted 52 basis points (bps) year over year to 71.5% due to an 8.3% rise in cost of products sold. Adjusted operating margin contracted 117 bps to 22.4% in the reported quarter.

During the quarter, selling, general and administrative expenses went up 7.6% to $953 million and research and development expenses rose 9.1% to $288 million. Royalty expenses of $18 million remain in line with the previous quarter.

Guidance

Boston Scientific has provided a guidance for 2019. The company projects revenue growth in the range of 7-9% on a reported basis and around 7-8.5% on an organic basis (at CER, excluding contribution of approximately 110 bps from certain acquisitions with no prior period related net sales). The Zacks Consensus Estimate 2019 revenues is pegged at $10.62 billion.

The company expects adjusted 2019 EPS in the band of $1.53-$1.58. The Zacks Consensus Estimate of $1.57 is within but near to the higher-end of the guided band.

The company also provided its first quarter of 2019 financial outlook. It projects revenue growth in the range of 6 on a reported basis and around 7 on an organic basis.  Adjusted EPS is expected in the band of 35-36 cents. The consensus mark for EPS stands at 37 cents while the same for revenues is at $2.54 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Boston Scientific has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Boston Scientific has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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