) reported adjusted earnings per share (after considering certain
adjustments other than amortization expense) ("EPS") of 10 cents
in the first quarter of 2013, a penny ahead of the year-ago
adjusted EPS. Adjusted EPS in the reported quarter remained at
the high end of the company's guidance range of 7-10 cents.
However, considering the amortized expenses adjustments, the
quarter's adjusted EPS came in at 16 cents, beating the year-ago
adjusted EPS of 15 cents. The Zacks Consensus Estimate for the
reported quarter has been pegged at 16 cents.
Revenues declined 6% year over year (down 4% at constant
exchange rate or CER, excluding divested business) to $1.761
billion during the first quarter of 2013, missing the Zacks
Consensus Estimate of $1.787 billion. However, reported revenues
remained well in line with the company provided guidance range of
$1.740−$1.815 billion. The company also presented an encouraging
performance in the BRIC (Brazil, Russia, Indiaand China)nations
with 29% (35% at CER) sales growth during the quarter.
Effective Jan 1, 2013, Boston Scientific made some changes in
its reporting segments in order to reorganize its business from
geographic regions to fully operationalized global business
units. As a result, the company currently has three new
global reportable segments consisting of Cardiovascular, Rhythm
Management and MedSurg.
Boston Scientific derives maximum revenues from
Cardiovascular, which comprises Interventional Cardiology and
Peripheral Interventions. Sales at these sub-segments were a
respective $505 million (down 14% year over year at CER) and $191
million (up 3% at CER), during the quarter.
Global sales of coronary stent system (within Interventional
Cardiology) were $310 million, down 19.9% due to a disappointing
performance from drug-eluting stents ("DES") that declined 19.5%
to $292 million and bare-metal stents that plunged 25% to $18
The next biggest contributor to Boston Scientific's top line
is Rhythm Management,which includes Cardiac Rhythm
Management(CRM) and Electrophysiology. This segment also
continued to disappoint with a 4% decline during the reported
quarter to $520 million. Worldwide CRM revenues remained at $501
million, with a 4.6% drop in sales. Sales from pacemakers and
defibrillators both declined 3.8% to $128 million and 4.9% to
$350 million, respectively.
Over the recent past the company has been targeting new
product launches to revive the sales of the beleaguered
Interventional Cardiology and CRM segments. However, the dismal
performance of these segments during the reported quarter proved
beyond doubt that these measures have not been enough to ride
over the challenges currently at play.
Other segments like Endoscopy, Urology/Women's Health and
Neuromodulation (coming under the MedSurg broader group) recorded
sales of $313 million (up 5%), $119 million (flat year over year)
and $89 million (up 6%), respectively.
The company recorded a 100 basis point (bps) year-over-year
rise in gross margin to 67.2%. Adjusted operating margin expanded
65 bps to 17.4% in the quarter, based on a 4.2% decline in
selling, general and administrative expenses to $631 million, a
5.1% drop in research and development expenses to $204 million
and a 14.5% decline in royalty expense to $41 million.
Boston Scientific exited the fiscal with cash and cash
equivalents of $268 million, up from $207 million at the end of
fiscal 2012 with long-term debt of $4.25 billion. The company
generated operating cash flow of $163 million and repurchased 13
million shares during the quarter under the existing share
Boston Scientific provided its second-quarter guidance and
updated its fiscal 2013 outlook. For the second quarter, the
company expects to report adjusted EPS of 14-17 cents on revenues
of $1.740−$1.800 billion. The current Zacks Consensus Estimate
for EPS of 16 cents is in line with the outlook, although the
same for revenues stands at $1.805 billion, which is beyond the
For full year 2013, the company lowered its revenue guidance
to the band of $6.950 to $7.150 billion (earlier band being
$7.168−$7.243 billion) with adjusted EPS in the range of 65−70
cents (64−70 cents). The Zacks Consensus Estimate for revenues
stands at $7.170 billion, while the same for EPS is at 68 cents.
While the revenues estimate was beyond the company's guidance
range, EPS estimate remained within the same.
Boston Scientific posted dismal first-quarter 2013 results
based on challenging economic conditions, competitive
environment, pressure on core segments and a larger-than-expected
currency headwind. Despite several initiatives undertaken by the
company to revive its top line, we remain cautious as its core
segments, implantable cardioverter defibrillator and DES
(contributing 35% of sales) continue witnessing several
The US defibrillator market remains an overhang for Boston
Scientific and its peers. 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 Medtronic's Resolute Integrity stent. However, to revive its
top line, Boston Scientific is focusing on strategic initiatives
to drive growth and profitability. These include restructuring
initiatives, strengthening its portfolio, targeting suitable
acquisitions in areas of unmet medical needs and focus on
Currently, Boston Scientific retains a Zacks Rank #3 (Hold).
Medical products companies such as
Health Net Inc.
), which carry a Zacks Rank #1 (Strong Buy) are worth
BOSTON SCIENTIF (BSX): Free Stock Analysis
CYBERONICS INC (CYBX): Free Stock Analysis
HEALTH NET INC (HNT): Free Stock Analysis
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