The challenges of
Boston Scientific Corporation
) core segments consisting of stents and defibrillators do not show
any sign of abatement. Revenues declined 8% year over year to
$1.848 billion during the fourth quarter 2011 and missed the Zacks
Consensus Estimate of $1.908 billion. Excluding the impact from
divested businesses and at constant exchange rates (CER), net sales
dropped 5%. For the full year, sales dropped 2% (5% at CER) to
$7.622 billion, nominally missing the Zacks Consensus Estimate of
The companyreported an EPS of 7 cents during the fourth quarter
of fiscal 2011 compared with 20 cents in the year-ago period.
However, after considering certain adjustments (other than
amortization expense), the adjusted EPS came in at 8 cents, in line
with the Zacks Consensus Estimate, but lower than the year-ago
quarter's adjusted EPS of 12 cents. For the fiscal, the adjusted
EPS of 45 cents beat the Zacks Consensus Estimate by a penny and
the previous year's 42 cents.
As per the guidance provided during third quarter results,
Boston Scientific expected to report adjusted EPS of 8-11 cents on
revenue of $1.85−$1.95 billion during the quarter and 44−47 cents
on revenue of $7.624−$7.724 billion during the fiscal. While the
company missed its EPS forecast during the quarter, revenue was
just in line, at the low end of the guided range.
Boston Scientific derives maximum revenues from Cardiovascular,
which comprises Interventional Cardiology and Peripheral
Interventions. Sales at these sub-segments were a respective $594
million (down 8% year over year at CER) and $184 million (up 6%),
during the quarter.
Global sales of coronary stent system (within Interventional
Cardiology) at $381 million declined 6.8% due to disappointing
performance from both drug-eluting stents (
) that declined 5.6% to $356 million and bare-metal stents that
dropped 21.8% to $25 million.
The next biggest contributor to Boston Scientific's top line,
Cardiac Rhythm Management (
), continued to disappoint with a 15% drop in sales to $482 million
during the quarter. Sales from pacemakers and defibrillators
declined 5% to $134 million and 17.7% to $348 million,
respectively. Over the recent past the company has been targeting
new product launches to revive the sales of the beleaguered
Cardiovascular and CRM segments. However, the dismal performance of
these segments during the reported quarter shows that these
measures were not enough to ride over the challenges currently at
Other segments of the company - Electrophysiology, Endoscopy,
Urology/Women's Health and Neuromodulation - recorded sales of $36
million (flat on a year-over-year basis), $304 million (up 6% at
CER), $127 million (down 1%) and $91 million (up 6%),
Boston Scientific exited the fiscal with cash and cash
equivalents of $267 million, up from $213 million at the end of
fiscal 2010. It is encouraging to note that the company was able to
reduce its debt level to $4.2 billion, consistent with the targeted
capital structure, from $4.9 billion at the end of December 2010.
The company generated operating cash flow of $349 million and
repurchased 52 million shares taking the total repurchase for 2011
to 82 million shares.
The company's bottom line experienced a positive impact from the
3% decline in the share count as a result of the continuous share
buyback program as well as a 32.7% decline in interest expense
associated with a lower debt level.
Boston Scientific unveiled its guidance for the first quarter
and fiscal 2012. For the first quarter, Boston Scientific expects
to report adjusted EPS of 5-8 cents (lower than the current Zacks
Consensus Estimate of 11 cents) on revenue of $1.825−$1.90 billion
(slightly lower than the Zacks Consensus Estimate of $1.907
For the fiscal, the company expects revenue and adjusted EPS in
the range of $7.3−$7.7 billion and 36−46 cents, respectively. The
Zacks Consensus Estimates for revenue and adjusted EPS stand at
$7.643 billion and 47 cents, respectively.
We are disappointed with the fourth quarter results of Boston
Scientific. Estimate revision trends among the analysts for the
fourth quarter and the fiscal during the past 30 days reflected the
issues troubling the company's core businesses and the current
economic uncertainties. This is all the more evident in
St. Jude Medical
) recently reported results. Revenues from its CRM division fell 6%
at CER year over year to $728 million, indicating sustained
softness in the CRM market.
Boston Scientific has been undertaking several strategic
initiatives over the past few quarters that included focus on
emerging markets, restructuring initiatives, among others.
Moreover, the launch of Promus Element Plus stent in US should lead
to better operating margins going ahead.
Longer term, we have a Neutral recommendation on Boston
Scientific. The stock retains a Zacks #3 Rank ("Hold") in the short
BOSTON SCIENTIF (
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