Will Boston Scientific (BSX) Surprise this Earnings Season? - Analyst Blog
Boston Scientific Corporation ( BSX ) is scheduled to report its second-quarter 2014 results before the opening bell on Jul 24. Last quarter, the company had posted a positive earnings surprise of 11.11%. Moreover, the four-quarter trailing average beat is pegged at 10.10%. Let's see how things are shaping up for this announcement.
Factors at Play
Amid challenging economic conditions, competitive environment, pressure on core segments and a larger-than-expected currency headwind, Boston Scientific posted mixed first-quarter 2014 results beating on earnings but missing revenues.
At the same time, the company also provided its outlook for the second quarter. Boston Sientific expects adjusted earnings to remain in the band of 18-20 cents per share while revenues are projected in the range of $1.84-$1.89 billion. In addition, gross margin will likely remain in the range of 70−71%. Selling, general and administrative as well as research and development expense margins are expected to be within 36.5%−37.5%, and 11.5%−12%, respectively, resulting in a targeted operating margin of 19% to 20%.
Despite several initiatives undertaken by Boston Scientific to revive its top line, we remain cautious as core segments like Cardiac Rhythm Management (CRM) and drug-eluting stents (DES) continue to witness several headwinds. The current challenging scenario fails to give any assurance that the size of the CRM and DES markets will increase above existing levels or the company will be able to increase its market share or net sales in these segments in the near term.
Meanwhile, Boston Scientific is 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.
Boston Scientific has a strong pipeline of products under development, the launch of which should drive the top line. We are also encouraged by the focus on emerging markets, especially India and China.
Our proven model does not conclusively show that Boston Scientific is likely to beat earnings this quarter. It is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Boston Scientific's Earnings ESP is 0.00%, since both the Most Accurate estimate and the Zacks Consensus Estimate stand at 20 cents.
Zacks Rank: Boston Scientific's Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revision momentum.
Other Stocks to Consider
Here are three companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Wright Medical Group Inc. ( WMGI ) has an earnings ESP of +2.22% and a Zacks Rank #1 (Strong Buy). Wright Medical will be reporting second-quarter earnings on Aug 5.
Hospira Inc. ( HSP ) has an earnings ESP of +1.79% and a Zacks Rank #2 (Buy). Hospira will report second-quarter earnings on Jul 30.
Community Health Systems, Inc. ( CYH ) has an earnings ESP of +2.94% and a Zacks Rank #3 (Hold). Community Health will be reporting second-quarter earnings on Aug 1.
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