Boston Scientific (BSX) Misses Q1 Earnings, Tightens EPS View

Boston Scientific Corporation BSX posted adjusted earnings per share (EPS) of 35 cents in the first quarter of 2019, up 6.1% from the year-ago quarter. However, the same missed the Zacks Consensus Estimate by a penny. Meanwhile, the figure matched the lower-end of the company’s guided range of 35-36 cents.

Reported EPS in the first quarter was 30 cents compared with earnings of 21 cents per share in the year-ago quarter.

Revenues in Detail

Revenues in the first quarter were up 4.8% year over year on a reported basis, up 7.8% on an operational basis (at constant exchange rate or CER) and up 6.3% on an organic basis (adjusted for foreign currency fluctuations and certain recent acquisitions) to $2.49 billion. Revenues missed the Zacks Consensus Estimate by 1.9%.

Boston Scientific Corporation Price, Consensus and EPS Surprise

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

In the first quarter, the company achieved 7.1% growth in the United States on a reported basis (same operationally), witnessed a 0.3% dip in the Europe, Middle East and Africa region (up 7.9%); up 5.3% in the Asia Pacific region (up 10.1%), up 0.3% in Latin America and Canada (up 7.5%) and up 13.3% in the emerging markets (up 22%).

Segmental 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 $661 million (up 4.8% year over year organically) and $311 million (up 11.2%), respectively, in the first quarter.

Boston Scientific's Rhythm and Neuro business comprises Cardiac Rhythm Management (CRM), Electrophysiology and Neuromodulation. CRM reflected a 2.6% year-over-year increase in organic sales to $491 million in the reported quarter.

Electrophysiology sales went up 10% year over year organically to $79 million.

Neuromodulation sales rose 12.4% year over year organically to $186 million.

Other segments like Endoscopy and Urology and Pelvic Health (under the MedSurg broader group) recorded sales of $440 million (up 8.1% organically) and $326 million (up 4.6%), respectively.

Margins

Gross margin in the first quarter contracted 103 basis points (bps) year over year to 70.7% due to an 8.6% rise in cost of products sold.

Adjusted operating margin, however, expanded 11 bps to 23.9% in the reported quarter. During the quarter, selling, general and administrative expenses inched up a nominal 1% to $869 million while research and development expenses rose 7.3% to $280 million. Whereas royalty expenses of $16 million declined 11.1% from the previous quarter.

Guidance

Boston Scientific has provided an update on its earlier-provided outlook for 2019. The company currently projects revenue growth in the range of 7-8% on a reported basis (from the earlier-provided view of 7-9%) and around 7-8% on an organic basis (from the past projection of 7-8.5%). The Zacks Consensus Estimate for 2019 revenues is pegged at $10.63 billion.

The company has narrowed its 2019 adjusted EPS expectation to a band of $1.54-$1.58 from the former forecast of $1.53-$1.58. The Zacks Consensus Estimate of $1.56 is within the guided band.