) reported a net income of $60 million or 4 cents per share in
the fourth quarter of 2012, a disappointment from net income of
$107 million or 7 cents per share in the year-ago period.
However, after considering certain adjustments (other than
amortization expense), the adjusted earnings per share (EPS) in
the reported quarter came in at 11 cents, up 37.5% year over year
and in line with the Zacks Consensus Estimate.
The quarter's adjusted EPS remains within the company's
guidance range of 9-12 cents. For the fiscal, the adjusted EPS of
41 cents matched the Zacks Consensus Estimate but was 4 cents
down from the previous year's EPS.
Revenues declined 1% year over year (same at constant exchange
rate or CER, excluding divested business) to $1.821 billion
during the fourth quarter of 2012, exceeding the Zacks Consensus
Estimate of $1.760 billion. Reported revenues remained within the
company provided guidance range of $1.740−$1.815 billion.
Fiscal 2012 revenues remained at $7.249 billion, ahead of the
Zacks Consensus Estimate of $7.187 billion but down 5% (down 3%
at CER, excluding the divested business) compared to
2011. The fiscal revenues marginally exceeded the guidance
range of $7.168−$7.243 billion.
While revenues derived from the domestic market declined 3%
year over year to $924 million, international revenues increased
1% to $796 million (up 3% at CER). The 15% growth (14% at CER) in
the Inter-Continental market ($235 million), was to a large
extent offset by drop in revenues in both Japan (down 4% to $236
million; up 1% at CER) and EMEA (down 3% to $396 million; down 1%
Boston Scientific derives maximum revenues from
Cardiovascular, which comprises Interventional Cardiology and
Peripheral Interventions. Sales at these sub-segments were a
respective $534 million (down 9% year over year at CER) and $199
million (up 9% at CER), during the quarter.
Global sales of coronary stent system (within Interventional
Cardiology) at $333 million declined 12.6% due to a disappointing
performance from both drug-eluting stents ("DES") that declined
12.4% to $312 million and bare-metal stents that plunged 16% to
The next biggest contributor to Boston Scientific's top line,
CRM, continued to disappoint with a 4% (at CER) drop in sales to
$457 million during the quarter. Sales from pacemakers and
defibrillators both declined 5.2% to $127 million and $330
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 of the company, namely Electrophysiology,
Endoscopy, Urology/Women's Health and Neuromodulation, recorded
sales of $38 million (up 5% at CER), $329 million (up 10%), $130
million (up 3%) and $104 million (up 14%), respectively.
The company recorded a 370 basis point (bps) year-over-year
rise in gross margin to 67.9%. Adjusted operating margin expanded
178 bps to 18.2% in the quarter, based on a 2.9% increase in
selling, general and administrative expenses to $639 million; a
3.9% increase in research and development expenses to $239
million and a 15.2% decline in royalty expense to $28
Boston Scientific exited the fiscal with cash and cash
equivalents of $207 million, up from $267 million at the end of
fiscal 2011 with long-term debt of $4.25 billion. The company
generated operating cash flow of $370 million and repurchased 18
million shares during the quarter under the 2011 share repurchase
Separately, the company announces the authorization of a new
share repurchase program of up to $1 billion. The company also
experienced a positive impact from the 7% decline in the share
count as a result of the continuous share buyback program.
The company also completed the acquisition of Vessix Vascular
that develops percutaneous radiofrequency balloon catheter
technology for treatment of hypertension. The acquisition is
expected to become a part of the Peripheral Interventions
business of the company.
Boston Scientific announced an expansion of its 2011
restructuring program to strengthen operational efficiencies and
support new growth investments. According to the company,
the restructuring program will reduce gross annual pre-tax
operating expenses by $100− $115 million in 2013.
Overall in 2013, the initial and expanded restructuring
program will reduce gross annual pre-tax operating expenses by
approximately $340− $375 million. Boston Scientific plans to
invest the savings from this total restructuring program in
targeted areas for future growth, including strategic growth
initiatives and emerging markets. The company anticipated
the primary activities under these initiatives to be completed by
the end of 2013.
Boston Scientific provided its first quarter and fiscal 2013
guidance. For the first quarter, Boston Scientific expects to
report adjusted EPS of 7-10 cents on revenue of $1.740−$1.815
billion. The current Zacks Consensus Estimate of 10 cents in EPS
is in line with the outlook as well as the consensus revenue
estimate of $1.790 billion and falls within the company's
For the fiscal, the company expects its revenue to remain in
the band of $7.168−$7.243 billion with adjusted EPS in the range
of 37−43 cents. The Zacks Consensus Estimates for revenue stands
at $7.116 billion, below the guided range whereas the consensus
EPS estimate of 44 cents remained outside the range provided.
The headwinds currently at play for Boston Scientific's CRM
segment also had an adverse impact on its peer,
St Jude Medical
) fourth quarter performance that was reported on Jan 23.
The US defibrillator market remains an overhang for Boston
Scientific and its peers, St Jude Medical and
). The DES business in the US has been witnessing challenges due
to pricing pressure, lower procedural volume, lower penetration
rates and share losses from the launch of Medtronic's Resolute
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 emerging markets. We are also encouraged by the
company's gradually improving topline which is reflected in its
strong revenues projection for 2013.
Currently Boston Scientific retains a Zacks #3 Rank (Hold) in
the short term. Medical products companies such as
), which carries a Zacks Rank #1 (Strong Buy), is expected to do
BOSTON SCIENTIF (BSX): Free Stock Analysis
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UNILIFE CORP (UNIS): Free Stock Analysis
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