Boston Scientific (BSX) Down 6.1% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Boston Scientific (BSX). Shares have lost about 6.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Boston Scientific due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Boston Scientific Q1 Earnings Top Estimates, Revenue View Up

Boston Scientific posted adjusted earnings per share of 39 cents for the first quarter of 2022, which marked a 5.4% rise from the year-ago figure. The figure topped the Zacks Consensus Estimate by a penny and was within the adjusted earnings per share guidance range of 38-40 cents. The quarter’s adjustments included certain amortization expenses, acquisition/divestitures-related net charges, and restructuring charges among others.

Reported adjusted earnings per share in the first quarter was 7 cents, a significant plunge from the year-ago quarter’s 23 cents per share.

Revenues of $3.03 billion in the first quarter improved 10% year over year on a reported basis and 12.6% on an operational basis (at constant exchange rate or CER). Revenues grew 9.7% on an organic basis (adjusted for foreign currency fluctuations and certain recent acquisitions and divestments). The top line exceeded the Zacks Consensus Estimate by 3.2%. The quarter’s top-line performance also exceeded the company’s projection of revenue growth of approximately 5-8% on both reported and organic basis.

Q1 Revenues in Detail

In the first quarter, revenues rose 12.8% in the United States on a reported basis (same operationally). Revenues were up 3.3% in the Europe, Middle East and Africa region (up 12%); 9.3% in the Asia Pacific zone (up 13.6%); 25.7% in Latin America and Canada (up 26.3%) and 22.8% in emerging markets (up 28.7%).

Segmental Analysis

In the first quarter, Boston Scientific has reorganized its operational structure and aggregated its core businesses, each of which generates revenues from the sale of Medical Devices, into two reportable segments, MedSurg and Cardiovascular. Within the Cardiovascular segment, the newly formed Cardiology division represents the combined former Rhythm Management and Interventional Cardiology businesses.

The company generates maximum revenues from Cardiovascular. Sales from its sub-segments, Cardiology and Peripheral Interventions were $1.41 billion (up 11.1% year over year organically) and $465 million (up 10.1%), respectively, in the first quarter.

Within MedSurg, Endoscopy generated revenues of $531 million, up 8.8% organically. Urology and Pelvic Health revenues were $413 million, reflecting organic growth of 6.9%. Neuromodulation within MedSurg reported $209 million in revenues, reflecting 7.6% growth organically year over year.

Notably, on Mar 1, 2021, Boston Scientific had completed the sale of its Specialty Pharmaceuticals segment.

Margins

Gross margin in the first quarter expanded 93 basis points (bps) year over year to 68.4%. There was a 6.8% rise in the cost of products sold to $955 million.

Selling, general and administrative expenses rose 4% to $1.06 billion. Research and development expenses rose 15.6% to $319 million. Royalty expenses of $12 million remained unchanged year over year. Adjusted operating margin improved 245 bps to 22.5% in the reported quarter.

2022 Guidance

Boston Scientific updated full-year 2022 guidance and also provided guidance for the second quarter.

Full-year net sales growth is expected in the range of 7-9% (previously 6-8%) on a reported basis and 6.5-8.5% (previously 6-8%) on anorganic basis. The Zacks Consensus Estimate is currently pegged at $12.81 billion, indicating a 7.8% rise from the 2021 reported figure.  Full-year adjusted EPS is expected in the range of $1.74 to $1.79 ($1.73 to $1.79). The Zacks Consensus Estimate of $1.76 indicates a 7.98% improvement from the 2021 annual figure.

For the second quarter of 2022, revenue growth is projected in the range of approximately 3-6% on a reported basis (same organically). Adjusted earnings are expected in the range of 41-43 cents per share. The current Zacks Consensus Estimate for second-quarter earnings and revenues is pegged at 44 cents and $3.26 billion, respectively.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Boston Scientific has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Boston Scientific has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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