Boston Scientific (BSX) Q4 Earnings In Line, Revenues Top

Boston Scientific Corporation BSX posted adjusted earnings per share (EPS) of 34 cents in the fourth quarter of 2017, up 13.3% from the year-ago quarter. The figure remained in line with the Zacks Consensus Estimate and fell within the company's guided range of 32-35 cents for adjusted EPS.

The adjustments take into consideration the estimated net income tax charge related to the deemed repatriation of unremitted earnings of foreign subsidiaries, partially offset by the benefit related to the re-measurement of the company's deferred taxes arising from a lower U.S. corporate tax rate.

Without these adjustments, the company reported a loss of 45 cents per share compared with EPS of 9 cents in the year-ago period.

For the full year, adjusted EPS came in at $1.26, a 13.5% increase from the year-ago number. However, this was in line with the Zacks Consensus Estimate. The full-year adjusted EPS also remains within the company’s projected band of $1.24-$1.27.

Revenues in Detail

Revenues in the fourth quarter were up 9.9% year over year on a reported basis and up 8.1% on operational basis (at constant exchange rate or CER) to $2.41 billion. The tally remained in line with the company’s earlier-announced preliminary sales result and exceeded the Zacks Consensus Estimate of $2.38 billion.

Revenues in 2017 were $9.05 billion, up 7.9% on reported basis and up 7.8% on operational basis from the 2016 count.

Boston Scientific Corporation Price, Consensus and EPS Surprise

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

Organic revenue growth in the fourth quarter (excluding the impact of changes in foreign currency exchange rates and sales from the acquisitions of EndoChoice Holdings and Symetis SA) was 6.8% year over year.

Geographically, in the fourth quarter, the company achieved 8.5% operational growth in the United States (up 7.5% organically), up 8% in Europe (up 4.4%); up 7.7% in the Asia, Middle East and Africa region (up 7.6%) and up 13.1% in the emerging markets (up 12.9%).

Segment Analysis

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

The company generates maximum revenues from Cardiovascular. Sales from its subsegments — Interventional Cardiology and Peripheral Interventions — were $636 million (up 6.9% year over year at CER) and $277 million (up 6.7%), respectively, during the fourth quarter.

The second largest contributor to Boston Scientific's top line was Rhythm Management, comprising Cardiac Rhythm Management (CRM) and Electrophysiology. CRM reflected a 1.2% year-over-year increase in sales to $488 million at CER in the reported quarter.

Worldwide, sales from pacemakers (within CRM) declined 7.1% to $143 million while defibrillators were up 8.5% to $346 million.

Electrophysiology sales went up 17.7% year over year at CER to $77 million.

Other segments like Endoscopy, Urology and Pelvic Health and Neuromodulation (under the MedSurg broader group) recorded sales of $436 million (up 13.1% at CER), $308 million (up 11.3%) and $186 million (up 14.6%), respectively.

Margins

Gross margin in the fourth quarter expanded 30 basis points (bps) year over year to 72.1% on 8.7% rise in cost of products sold. Adjusted operating margin improved 232 bps to 23.5% in the reported quarter. During the quarter, selling, general and administrative expenses went up 6.6% to $886 million while research and development expenses rose 3.1% to $264 million. Royalty expenses decreased 10% to $18 million in the quarter.

Guidance

Boston Scientific has provided its 2018 guidance. The company projects current-year earnings in the range of $9.650-$9.800 billion (annualized growth of 7-8% on reported basis and 5-6% increase on an organic basis (at CER and including contribution of approximately 30 bps from Symetis). The Zacks Consensus Estimate for current-year revenues is pegged at $9.1 billion, below the guided range.

Adjusted EPS guidance for 2018 is issued in the range of $1.35-$1.39. The Zacks Consensus Estimate of $1.37 is within this guided band.

The company also provided its first-quarter 2018 financial outlook. Adjusted earnings are expected in the band of 30-32 cents per share on revenues of $2.320-$2.350 billion. The consensus mark for EPS stands at 31 cents while for revenues, $2.29 billion.

Our Take

Boston Scientific posted a mixed fourth-quarter performance with earnings in line with the Zacks Consensus Estimate and revenues, ahead of the mark. However, balanced growth across all business lines and geographies were impressive. Also, a gradually improving foreign exchange scenario has also started to contribute to the company’s overall topline performance. The promising 2018 view is all the more encouraging and indicative of this overall bullish trend to continue in the near term.

Boston Scientific is leaving no stone unturned to strengthen its core businesses and invest in new technologies as well as global markets, accounting for higher sales across all its geographies in the fourth quarter. We are also optimistic about the company gaining a number of product approvals both in the domestic and overseas markets.

Among the recent developments, worth mentioning are the FDA approvals for the company’s Vercise Deep Brain Stimulation System (to treat the symptoms of Parkinson's disease) and the Spectra WaveWriter Spinal Cord Stimulator System (to simultaneously provide paresthesia-based and sub-perception therapy). The company has also invested in Millipede, a privately-held company having developed the IRIS Transcatheter Annuloplasty Ring System for treating severe mitral regurgitation.

Zacks Rank & Key Picks

Boston Scientific carries a Zacks Rank #3 (Hold). A few better-ranked stocks that reported solid earnings this season are PetMed Express PETS, PerkinElmer PKI and Accuray ARAY. While PetMed sports a Zacks Rank #1 (Strong Buy), PerkinElmer and Accuray carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed recently reported third-quarter fiscal 2018 results with adjusted earnings per share of 44 cents. The bottom line soared 88.3% year over year. Revenues in the reported quarter rose 13.7% on a year-over-year basis to $60.1 million.

PerkinElmer released fourth-quarter 2017 adjusted earnings per share of 97 cents. Adjusted revenues were approximately $641.6 million, up from $567 million in the year-ago quarter.

Accuray reported a loss of 6 cents per share in second-quarter fiscal 2018, narrower than the year-ago figure by 5 cents. The top line improved 15% year over year to $100.3 million.

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