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Boston Scientific (BSX) Q2 Earnings Top on Growth in All Lines

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Boston Scientific Corporation (BSX - Free Report) posted adjusted earnings per share (EPS) of 39 cents in the second quarter of 2019, down 4.9% from the year-ago quarter. However, the same exceeded the Zacks Consensus Estimate by a penny. Meanwhile, the figure matched the upper-end of the company’s guided range of 37-39 cents.

Reported EPS in the second quarter was 11 cents compared with earnings of 40 cents per share in the year-ago quarter.

Revenues in Detail

Revenues in the second quarter rose 5.6% year over year reportedly, up 8% on an operational basis (at constant exchange rate or CER) and up 6.3% on an organic basis (adjusted for foreign currency fluctuations and certain recent acquisitions) to $2.63 billion. Revenues missed the Zacks Consensus Estimate of $2.64 billion by 0.34%.

In the second quarter, the company achieved 6% growth in the United States on a reported basis (same operationally); 2.3% improvement in the Europe, Middle East and Africa region (up 8.3%); 8.9% growth in the Asia Pacific zone (up 13.2%), 4.5% rise in Latin America and Canada (up 9.3%) and 12.3% increase in the emerging markets (up 20%).

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 subsegments — Interventional Cardiology and Peripheral Interventions — were $706 million (up 8.1% year over year organically) and $320 million (up 8.2%), respectively, in the second quarter.

Boston Scientific's Rhythm and Neuro business comprises Cardiac Rhythm Management (CRM), Electrophysiology and Neuromodulation. CRM reflected a 2.8% year-over-year increase in organic sales to $498 million in the reported quarter.

Electrophysiology sales went up 9.5% year over year organically to $84 million.

Neuromodulation sales inched up 0.1% year over year organically to $204 million.

Other segments like Endoscopy and Urology and Pelvic Health (under the MedSurg broader group) recorded sales of $470 million (up 8.4% organically) and $348 million (up 6.1%), respectively.

Margins

Gross margin in the second quarter expanded 87 basis points (bps) year over year to 71.2% despite a 2.6% rise in the cost of products sold.

Adjusted operating margin grew 10 bps to 23.1% in the reported quarter. Selling, general and administrative expenses increased 9.3% to $968 million while research and development expenses rose 1.8% to $280 million in the period. Meanwhile, royalty expenses of $17 million are flat year over year.

Guidance

Boston Scientific reaffirmed its earlier-provided revenues and adjusted EPS outlook for 2019. The company once again projects revenue growth in the 7-8% range on a reported basis as well as organically. The Zacks Consensus Estimate for 2019 revenues is pegged at $10.57 billion.

The company also reiterated its 2019 adjusted EPS expectation in the band of $1.54-$1.58. The Zacks Consensus Estimate of $1.55 is within the guided range.

The company also provided its third-quarter 2019 financial outlook. It envisions revenue growth in the range of 8-10% on a reported basis and at around 7.5-9% on an organic basis. Adjusted EPS is anticipated within 37-39 cents. The consensus mark for EPS stands at 39 cents while the same for revenues is pinned on $2.62 billion.

Our Take

Boston Scientific posted mixed second-quarter results with adjusted earnings beating the consensus mark but declining year over year. Meanwhile, revenues lagged the Zacks Consensus Estimate but improved on a year-over-year basis.  

However, growth across all business lines and geographies was encouraging.

The company is leaving no stone unturned to strengthen its core businesses and invest in the new technologies as well as the global markets, accounting for the uptick in sales across most geographies in the second quarter.

We are also optimistic about the company commencing a controlled launch of the LOTUS Edge Aortic Valve System for patients with severe aortic stenosis in the United States and Europe. This apart, it received the FDA nod for the Tactra Next-Generation Malleable Penile Prosthesis and the VICI VENOUS STENT system.As a major development, the company received an approval from the United Kingdom's National Health Service for inclusion of the SpaceOAR Hydrogel in its Innovation and Technology Payment program, expanding treatment access to men undergoing radiotherapy for prostate cancer.

Zacks Rank & Key Picks

Boston Scientific has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader medical space are Hologic Inc. (HOLX - Free Report) , DENTSPLY SIRONA Inc. (XRAY - Free Report) and Teleflex Inc. (TFX - Free Report) .

Hologic is scheduled to release second-quarter 2019 results on Jul 31. The Zacks Consensus Estimate for its quarterly adjusted EPS is pegged at 61 cents and the same for revenues, at $834.6 million. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DENTSPLY SIRONA is scheduled to release second-quarter 2019 results on Aug 2. The Zacks Consensus Estimate for the period’s adjusted EPS is 62 cents and the same for revenues, $1.03 billion. The stock sports a Zacks Rank #1.

Teleflex is expected to release second-quarter 2019 results on Aug 1. The Zacks Consensus Estimate for second-quarter adjusted EPS stands at $2.59 and the same for the top line, pinned on $636.7 million. The stock has a Zacks Rank of 2.

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