) reported adjusted earnings per share (EPS) (after considering
certain one-time adjustments other than amortization expense) of 14
cents in the second quarter of 2014, a couple of cents ahead of the
year-ago adjusted number.
However, considering amortized expense adjustments, the quarter's
adjusted EPS came in at 21 cents, 16.7% ahead of the year-ago
adjusted number. This also exceeded the company's adjusted EPS
guidance range of 18-20 cents and the Zacks Consensus Estimate of
Without these adjustments, the company reported net loss of $104
million or breakeven EPS in the quarter, a huge slash from the
year-ago net income of $152 million or earnings of 10 cents a
Boston Scientific Corporation - Earnings
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Revenues in the second quarter registered a 4% increase year over
year (same at constant exchange rate or CER, excluding divested
business) to $1.873 billion. The figure exceeded the Zacks
Consensus Estimate of $1.867 billion, but remained within the
company-provided guidance range of $1.84-$1.89 billion.
Boston Scientific currently has three global reportable segments
comprising Cardiovascular, Rhythm Management and MedSurg.
The company generates maximum revenues from Cardiovascular, which
comprises Interventional Cardiology and Peripheral Interventions.
Sales in these sub-segments were $528 million (up 1% year over year
at CER) and $211 million (up 3%), respectively, during the quarter.
Global sales of coronary stent system (within Interventional
Cardiology) were $310 million, down 1.9%. Despite improvement in
drug-eluting stents (DES) performance that increased 3.8% to $298
million, the downfall was due to the poor bare-metal stents
performance that plunged 29.4% to $17 million.
The next biggest contributor to Boston Scientific's top line was
Rhythm Management, which includes Cardiac Rhythm Management (CRM)
and Electrophysiology. CRM reflected sales improvement of 4% to
$497 million at CER.
Worldwide sales from pacemakers (within CRM) improved 6.8% to $142
million, while defibrillators increased 3.8% to $355 million.
Electrophysiology sales surged a massive 54% year over year at CER
to $56 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. The improved performance in these core
segments in the reported quarter, proved beyond doubt that the
measures undertaken are working effectively to counter the ongoing
Other segments like Endoscopy, Urology/Women's Health and
Neuromodulation (coming under the MedSurg broader group) recorded
sales of $333 million (up 4% at CER), $133 million (up 7%) and $114
million (up 3%), respectively.
Gross margin was down 76 basis points (bps) year over year to
69.9%. Adjusted operating margin contracted 130 bps to 17.9% in the
quarter. During the reported quarter, selling, general and
administrative expenses increased 12.4% to $743 million while
research and development expenses dropped 7.6% to $206 million.
Royalty expense also plunged 46.7% to $25 million.
Boston Scientific exited the second quarter with cash and cash
equivalents of $357 million, up from $217 million at the end of
fiscal 2013, and had long-term debt of $4.25 billion. The company
generated operating cash flow of $286 million in the quarter.
Boston Scientific increased its 2014 adjusted EPS guidance to the
range of 79-83 cents from earlier 77-82 cents (considering all
one-time items including amortized expense). Estimated revenues, on
the other hand, have been narrowed to the range of $7.325-$7.425
billion (growth of 3% to 5% on an operational basis) from the
earlier guidance of $7.30-$7.50 billion. The current Zacks
Consensus Estimate for EPS of 81 cents and revenues of $7.397
billion coincide with the company's outlook.
For the third quarter of 2014, adjusted earnings are expected to
remain in the band of 18-20 cents per share while the company
predicts revenues within $1.79-$1.84 billion. The Zacks Consensus
Estimate for EPS stands at 20 cents, while that for revenues is
After several quarters of drag in its core segments amid
challenging economic conditions, competitive environment and
currency headwind, Boston Scientific has managed to post an
impressive performance in the reported quarter with balanced growth
across all its segments. The company's improved guidance for 2014
also helps us to rely on the sustainability of this growth
Over the past few quarters, Boston Scientific has been resorting to
all available means in order to return to growth. To revive its top
line, the company is focusing on strategic initiatives to drive
growth and profitability. These include the recently announced
restructuring initiatives, strengthening of the company's
portfolio, targeting suitable acquisitions in areas of unmet
medical needs, and focusing on emerging markets. Moreover, Boston
Scientific has managed to successfully move on with its strong
pipeline of products.
Currently, Boston Scientific retains a Zacks Rank #3 (Hold). Some
of the better-placed Medical stocks are
Mead Johnson Nutrition Company
), all carrying a Zacks Rank #2 (Buy).
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