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Boston Scientific (BSX) Beats on Q3 Earnings, Misses Revenues

Boston Scientific CorporationBSX posted adjusted earnings per share (EPS) of 35 cents in the third quarter of 2018, up 12.9% from the year-ago quarter. Earnings surpassed the Zacks Consensus Estimate of 34 cents. Further, adjusted EPS coincided with the high end of the company's guided range of 33-35 cents.

The company reported EPS of 31 cents in comparison with 20 cents in the year-ago quarter.

Revenues in Detail

Revenues in the third quarter were up 7.7% year over year on a reported basis and up 9.1% on an operational basis (at constant exchange rate or CER) to $2.39 billion. However, revenues missed the Zacks Consensus Estimate by 0.6%.

Organic revenue growth in the quarter (excluding the impact of changes in foreign currency exchange rates and sales from the acquisitions of NxThera, Inc. and Claret Medical, Inc., excluding prior period related net sales) was 8.7% year over year.

Boston Scientific Corporation Price, Consensus and EPS Surprise

Boston Scientific Corporation Price, Consensus and EPS Surprise | Boston Scientific Corporation Quote

The company achieved 9.4% growth in the United States on a reported basis (same operationally), 5.1% in Europe, Middle East and Africa region (up 7.4%); 6.2% in the Asia Pacific region (up 8.1%), 3.7% in Latin America and Canada (up 18%) and 11.1% in the emerging markets (up 19.7%).

Segment Analysis

Boston Scientific currently has three global reportable segments: Cardiovascular, Rhythm and Neuro and MedSurg.

The company generates maximum revenues from Cardiovascular. Sales from its subsegments - Interventional Cardiology and Peripheral Interventions - were $615 million (up 5.6% year over year organically) and $293 million (up 10.7%), respectively, in the third quarter.

Boston Scientific's Rhythm and Neuro business comprises Cardiac Rhythm Management (CRM), Electrophysiology and Neuromodulation. CRM reflected a 3.2% year-over-year increase in organic sales to $475 million in the reported quarter.

Electrophysiology sales went up 8.6% year over year organically to $76 million.

Neuromodulation sales rose 23.5% year over year organically to $189 million.

Other segments like Endoscopy and Urology and Pelvic Health (under the MedSurg broader group) recorded sales of $443 million (up 11.6% organically) and $303 million (up 10%), respectively.

Margins

Gross margin in the third quarter expanded 40 basis points (bps) year over year to 72% in spite of a 5.5% rise in cost of products sold. Adjusted operating margin contracted 90 bps to 22.7% in the reported quarter. During the quarter, selling, general and administrative expenses went up 8.8% to $870 million and research and development expenses rose 13.8% to $289 million. Royalty expenses rose 6.3% year over year to $17 million in the quarter.

Guidance Updated

Boston Scientific has provided an updated guidance for 2018. The company now projects current-year revenues in the range of $9.787 to $9.827 billion compared to the previous $9.800-$9.880 billion. This represents annualized growth of 8-9% on a reported basis and around 7% on an organic basis (at CER, excluding contribution of approximately 80 bps from acquisitions and with no prior period related net sales). The Zacks Consensus Estimate for current-year revenues of $9.86 billion lies above the guided range.

The company now expects adjusted 2018 EPS in the band of $1.38-$1.40 compared to the prior $1.37-$1.41. The Zacks Consensus Estimate of $1.39 is within the guided band.

The company also provided its fourth-quarter 2018 financial outlook. Adjusted EPS is expected in the band of 30-32 cents on revenues of $2.525-$2.565 billion. The consensus mark for EPS stands at 36 cents while the same for revenues is at $2.59 billion.

Our Take

Boston Scientific reported a mixed third quarter. Growth across all business lines and geographies was promising.

The company is leaving no stone unturned to strengthen its core businesses and invest in new technologies as well as global markets, which accounted for the uptick in sales across all geographies in the second quarter.

We are also optimistic about the receipt of FDA approval for the Eluvia Drug-Eluting Vascular Stent System, the Promus ELITE Everolimus-Eluting Platinum Chromium Coronary Stent System, the VISIONIST X4 Cardiac Resynchronization Therapy Pacemaker (CRT-P) and RELIANCE 4-FRONT Defibrillation Lead.

Boston Scientific launched the LithoVue Empower Retrieval Deployment Device during the reported quarter. The company also rolled out the GUIDE XT System for visualization of Deep Brain Stimulation in Europe.

Boston Scientific also closed the acquisitions of Claret Medical, Inc., VENITI, Inc and Augmenix, Inc in the quarter.

Zacks Rank & Key Picks

Boston Scientific has a Zacks Rank #3 (Hold). A fewbetter-ranked stocks in the broader medical space are Amedisys, Inc. AMED , Baxter International Inc BAX and Masimo Corporation MASI .

Amedisys is expected to release third-quarter 2018 results on Oct 29. The Zacks Consensus Estimate for adjusted EPS is 79 cents and for revenues is $410.2 million. The stock carries a Zacks Rank of 1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Baxter is expected to release third-quarter 2018 results on Oct 31. The Zacks Consensus Estimate for EPS is pegged at 74 cents and for revenues at $2.79 billion. The stock has a Zacks Rank #2 (Buy).

Masimo is slated to release third-quarter 2018 results on Oct 31. The Zacks Consensus Estimate for EPS is pinned at 68 cents and for revenues at $206.3 million. The company is a Zacks #2 Ranked player.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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