Boston Scientific Corporation BSX posted adjusted earnings per share (EPS) of 33 cents in the first quarter of 2018, up 13.8% from the year-ago quarter. Earnings also surpassed the Zacks Consensus Estimate of 31 cents. Further, adjusted EPS exceeded the company’s guided range of 30-32 cents.

The company reported EPS of 21 cents was in line with the year-ago quarter.

Revenues in Detail

Revenues in the first quarter were up 10.1% year over year on a reported basis and up 6.2% on operational basis (at constant exchange rate or CER) to $2.38 billion. The revenue figure exceeded the Zacks Consensus Estimate of $2.34 billion.

Organic revenue growth in the first quarter (excluding the impact of changes in foreign currency exchange rates and sales from the acquisitions of Symetis SA) was 5.2% year over year.

Geographically, in the first quarter, the company achieved 4.8% operational growth in the United States (same organically), up 10% in Europe, Middle East and Africa region (up 5.7%); up 5.8% in the Asia Pacific region (same), up 9.5% in Latin America and Canada (up 8.6%) and up 17.2% in the emerging markets (up 16.7%).

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 $645 million (up 1.3% year over year organically) and $288 million (up 6%), respectively, during the first quarter.

Boston Scientific Corporation Price, Consensus and EPS Surprise

 

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

The second largest contributor to Boston Scientific’s top line was the Rhythm and Neuro business, comprising Cardiac Rhythm Management (CRM), Electrophysiology and Neuromodulation. CRM reflected a 2.4% year-over-year increase in organic sales to $493 million in the reported quarter.

Electrophysiology sales went up 11.5% year over year organically to $75 million.

Neuromodulation sales rose 17.2% year over year organically to $169 million.

Other segments like Endoscopy and Urology and Pelvic Health (under the MedSurg broader group) recorded sales of $418 million (up 6.2% organically) and $293 million (up 9.2%) respectively.

Margins

Gross margin in the first quarter expanded 190 basis points (bps) year over year to 71.8% on 3.4% rise in cost of products sold. Adjusted operating margin improved 240 bps to 23.9% in the reported quarter. During the quarter, selling, general and administrative expenses went up 8.3% to $860 million while research and development expenses rose 11.1% to $261 million. Royalty expenses inched up 5.9% to $18 million in the quarter.

Guidance Raised

Boston Scientific has provided an updated guidance for 2018. The company projects current-year revenues in the range of $9.750-$9.900 billion, compared with the previous $9.650-$9.800 billion (annualized growth of 8-10% on a reported basis and 5-7% on an organic basis (at CER and including contribution of approximately 40 bps from Symetis). The Zacks Consensus Estimate for current-year revenues is pegged at $9.74 billion, below the guided range.

Adjusted EPS guidance for 2018 is estimated in the range of $1.37-$1.41 as compared with the previous range of $1.35-$1.39. The Zacks Consensus Estimate of $1.37 is pegged at the low end of the guided band.

The company also provided its second-quarter 2018 financial outlook. Adjusted EPS are expected in the band of 33-35 cents on revenues of $2.450-$2.500 billion. The consensus mark for EPS stands at 35 cents while the same for revenues is at $2.44 billion.

Our Take

Boston Scientific posted an impressive first quarter. Growth across all business lines and geographies was promising as well. The 2018 view is also paints a bright picture for 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, which have accounted for the uptick in sales across all geographies in the first quarter.

We are also optimistic about the company achieving clinical milestones for products like Ranger Drug Coated Balloon and WATCHMAN Left Atrial Appendage Closure (LAAC) Device.

During the quarter, Boston Scientific announced an agreement to buy Minnesota-based NxThera for a deal value of up to $406 million. Privately-held NxThera is the developer and marketer of the Rezum system in the United States and Europe.

Zacks Rank & Key Picks

Boston Scientific has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical sector are Abaxis, Inc. ABAX, Bio-Rad Laboratories, Inc. BIO and ResMed Inc. RMD). While Abaxis and Bio-Rad sport a Zacks Rank #1 (Strong Buy), ResMed carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Abaxis is expected to release fourth-quarter fiscal 2018 results on Apr 26. The Zacks Consensus Estimate for adjusted EPS is 32 cents and for revenues is $67 million.

Bio-Rad is expected to report first-quarter 2018 results on May 3. The Zacks Consensus Estimate for adjusted EPS is 90 cents and for revenues is $529.5 million.

ResMed is slated to release third-quarter fiscal 2018 results on Apr 26. The Zacks Consensus Estimate for adjusted EPS is 83 cents and for revenues is $564.9 million.

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