) reported adjusted earnings per share (after considering certain
one-time adjustments other than amortization expense) of 13 cents
in the fourth quarter of 2013, 2 cents ahead of the year-ago
adjusted EPS figure.
However, considering amortized expense adjustments, the
quarter's adjusted EPS came in at 21 cents, 16.7% ahead of the
year-ago adjusted EPS. This also exceeded the company's adjusted
EPS guidance range of 18-20 cents and the Zacks Consensus
Estimate of 19 cents.
However, without these adjustments, the company reported net
income of $108 million or 8 cents per share in the quarter, an
80% or 100% jump from the year-ago net income of $60 million or 4
cents a share, respectively.
For the full year, adjusted EPS (including amortized expense
adjustments) reached 73 cents, up 10.6% from the prior-year
figure surpassing the Zacks Consensus Estimate by 2 cents.
Revenues in the fourth quarter registered a 1% increase year
over year (up 5% at constant exchange rate or CER, excluding
divested business) to $1.838 billion. The figure exceeded the
Zacks Consensus Estimate of $1.829 billion, as well as the
company-provided guidance range of $1.780−$1.830 billion. For the
full year, the company reported revenues of $7.143 billion,
representing 1% decline on reported basis (up 1% at CER).
Boston Scientific currently has three global reportable
segments comprising Cardiovascular, Rhythm Management and
The company generates maximum revenues from Cardiovascular,
which comprises Interventional Cardiology and Peripheral
Interventions. Sales in these sub-segments were $500 million
(down 3% year over year at CER) and $205 million (up 7% at CER),
respectively, during the quarter.
Global sales of coronary stent system (within Interventional
Cardiology) were $287 million, down 13.8%. The downfall was owing
to a disappointing performance from drug-eluting stents (DES)
that declined 12.8% to $272 million, and bare-metal stents that
plunged 28.5% to $15 million.
The next biggest contributor to Boston Scientific's top line
is Rhythm Management, which includes Cardiac Rhythm Management
(CRM) and Electrophysiology. CRM continued to remain sluggish
with 2% revenue growth to $468 million on a year-over-year basis
(up 3% at CER).
After several quarters of drag, worldwide sales from
pacemakers (within CRM) showed improvement of 6.3% to $135
million, while defibrillators edged up 0.9% to $333 million.
Electrophysiology sales improved 33% year over year (up 35% at
CER) to $50 million.
Over the recent past, the company has been targeting new
product launches to revive the sales of the beleaguered
Interventional Cardiology and CRM segments. Although, CRM is
gradually coming back to growth, the dismal performance of
Interventional Cardiology during the reported quarter proved
beyond doubt that the measures have not been enough to counter
the ongoing challenges.
Other segments like Endoscopy, Urology/Women's Health and
Neuromodulation (coming under the MedSurg broader group) recorded
sales of $343 million (up 8% at CER), $132 million (up 5%) and
$138 million (up 33%), respectively.
Gross margin grew 182 basis points (bps) year over year to
69.8%. Adjusted operating margin however contracted 88 bps to
17.4% in the quarter. During the reported quarter, selling,
general and administrative expenses increased 13.3% to $724
million, research and development expenses dropped 9.6% to $216
million and royalty expense was slashed by 14.3% to $24
Boston Scientific exited the year 2013 with cash and cash
equivalents of $217 million, up from $207 million at the end of
fiscal 2012, and had long-term debt of $4.24 billion. The company
generated operating cash flow of $1.078 billion and repurchased
51.4 million shares during 2013 under the existing share
Boston Scientific provided its full year 2014 guidance.The
company expects to report adjusted EPS of 75-80 cents
(considering all one-time items including amortized expense) on
revenues of $7.380-$7.500 billion. The current Zacks Consensus
Estimate for EPS of 78 cents and revenues of $7.400 billion
coincide with the company's outlook.
For the first quarter of 2014, adjusted earnings are expected
to remain in the band of 16 cents-18 cents per share while the
company predicts revenues within $1.755-$1.805 billion.The Zacks
Consensus Estimate for EPS stands at 20 cents, while that for
revenues is $1.799 billion.
Despite challenging economic conditions, competitive
environment, pressure on core segments and a larger-than-expected
currency headwind, Boston Scientific managed to beat estimates in
the fourth quarter of 2013 and exited the year on a positive
We are also looking forward to the recently completed
acquisition of electrophysiology business of
C.R. Bard, Inc.
). We believe this to add further traction to Boston Scientific's
growing electrophysiology business in the coming months. Also,
pacing business is gradually coming back to the growth
trajectory, which is an encouraging sign.
However, for quite a long time, the US defibrillator and stent
markets have remained as major overhangs. Despite several
initiatives undertaken by the company to revive its top line, we
remain cautious as its core segments - implantable cardioverter
defibrillator and DES are still taking a toll on the
The DES business in the U.S. has been witnessing challenges
due to pricing pressure, lower procedural volume, lower
penetration rates and share losses from the launch of
) Resolute Integrity stent.
To revive its top line, Boston Scientific is focusing on
strategic initiatives to drive growth and profitability. These
include the recently announced restructuring initiatives for
2014, strengthening of its portfolio, targeting suitable
acquisitions in areas of unmet medical needs, and focus on
emerging markets. However, near-term visibility of these
initiatives remains a matter of question.
Currently, Boston Scientific retains a Zacks Rank #4 (Sell).
Among the better-ranked medical product companies,
) which carries a Zacks Rank #2 (Buy), is worth considering.
BARD C R INC (BCR): Free Stock Analysis
BOSTON SCIENTIF (BSX): Free Stock Analysis
MEDTRONIC (MDT): Free Stock Analysis Report
STRYKER CORP (SYK): Free Stock Analysis
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