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Boston Scientific (BSX) LOTUS Edge Recall to Mar Q4 Earnings

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Boston Scientific Corporation BSX is scheduled to report fourth-quarter 2020 results on Feb 3, before the opening bell.

In the last reported quarter, the company reported earnings per share of 37 cents, beating the Zacks Consensus Estimate of 25 cents per share. It beat estimates in three of the trailing four quarters and missed in one. The trailing four-quarter average earnings surprise is 84.35%.

Preliminary Result

On Jan 12, the company announced preliminary results. Revenues were roughly $2.71 billion during the fourth quarter 2020, a 6.8% decline on a reported basis (down 8.3% on an operational basis (at constant exchange rate or CER) and down 8% on an organic basis (CER growth excluding the impact of acquisitions and divestments) year over year. The organic results included 370 basis points negative impact associated with the conversion of U.S. WATCHMAN customers to a consignment inventory model and transition to the next-generation WATCHMAN FLX Left Atrial Appendage Closure (LAAC) Device.

Boston Scientific Corporation Price and EPS Surprise

Boston Scientific Corporation Price and EPS Surprise
Boston Scientific Corporation Price and EPS Surprise

Boston Scientific Corporation price-eps-surprise | Boston Scientific Corporation Quote

In the fourth quarter, per the preliminary results, MedSurg segment reported 1.5% growth (up 0.1% at CER, up 1.1% organically). Rhythm and Neuro reported 6.1% decline (down 7.7% both at CER and organically). Cardiovascular’s preliminary results recorded a 12% decline (down 13.5% both at CER and organic basis).

In full-year 2020, per the preliminary result, the company generated net sales of approximately $9.91 billion, down 7.7% on a reported basis (down 7.8% at CER, down 11.3% on an organic basis.

Factors at Play

Top-line growth is likely to have improved from the last reported quarter as Boston Scientific is appropriately investing in virtual physician education, remote clinical support and digital sales enablement suitable for healthcare support amid the pandemic. Per the company’s October update, with all these, it has started to see strong region-wise recovery.

The company had earlier noted that its China business, which reported 2% growth in the third quarter on an organic basis, should record further growth in the fourth quarter banking on a balanced and sharp recovery across Boston Scientifics’ business units in that region.

Within Interventional Cardiology (IC) business, in 2020, Boston Scientific received approval for multiple product launches across major markets, including WATCHMAN FLX. We expect this to have contributed strongly to the company’s fourth-quarter IC business.

On the other hand, in November, the company initiated a global, voluntary recall of all unused inventory of the LOTUS Edge Aortic Valve System due to complexities associated with the product delivery system. Per the announcement, this decision is expected to result in estimated total pre-tax GAAP charges of approximately $225 million to $300 million due to inventory, fixed asset, intangible asset and certain other exit charges. Roughly $100 million to $150 million of these charges will impact the company's adjusted results. The vast majority of these charges have been recorded during the fourth quarter.

Within the Peripheral Interventions (PI) business, fourth-quarter sales are expected to be more resilient to the pandemic banking on favorable mix of high acuity and outpatient site of care for procedures, as well as a category-leading portfolio and strong cadence of new product launches.

Further, a higher mix of non-deferrable procedures is expected to have aided the company’s fourth-quarter MedSurg sales. Within Urology/ Pelvic Health, sales from the company’s stone franchise and SpaceOAR products have shown better resilience. Boston Scientific continues to expect urology/pelvic health to have one of the faster potential recovery curves, aided by a higher office ASE mix for most elective procedures.

Within Endoscopy, recovery started from June, leveraging on a favorable mix of both relatively high acuity and outpatient side of service. ERCP procedures for the pancreas and bile ducts are expected to report trend improvement as stone removal and tumor biopsies typically cannot be deferred for more than four to six weeks.

Within Neuromodulation, the company is expected to have registered balanced procedure recovery across RF (radiofrequency), Vertiflex and Spinal Cord Stimulation banking on strong execution of category leadership strategy in pain.

Q4 Estimates

The Zacks Consensus Estimate for fourth-quarter total revenues of $2.71 billion suggests decline of 6.8% from the prior-year reported number. The consensus mark for adjusted earnings of 31 cents per share implies 32.6% decline from the year-ago reported figure.

What Our Quantitative Model Predicts

Per our proven model, a stock with a combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, has a good chance of beating estimates. This is not the case as you can see:

Earnings ESP: Boston Scientific has an Earnings ESP of -9.14%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Boston Scientific carries a Zacks Rank #4 (Sell).

Stocks to Consider

Here are a few medical stocks worth considering as these have the right combination of elements to beat on earnings this time around.

Patterson Companies, Inc. PDCO currently has a Zacks Rank #2 and an Earnings ESP of +1.96%. The company is scheduled to report fourth-quarter 2020 earnings on Feb 25. You can see the complete list of today’s Zacks #1 Rank stocks here.

Teladoc Health, Inc. TDOC has an Earnings ESP of +31.58% and a Zacks Rank of 2, at present. The company is slated to release fourth-quarter 2020 numbers on Feb 24.

Tenet Healthcare THC has an Earnings ESP of +7.10% and a Zacks Rank of 1, at present. The company is slated to release fourth-quarter 2020 numbers on Feb 9.

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