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Boston Scientific (BSX) Q1 Earnings Beat, Organic Sales Up

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Boston Scientific Corporation BSX posted adjusted earnings per share (EPS) of 37 cents for the first quarter of 2021, which marked a 32.1% surge from the year-ago figure. The figure exceeded the Zacks Consensus Estimate by 23.3%. The quarter’s adjustments include certain amortization expenses, acquisition/divestitures-related net credits and investment portfolio net losses among others.

Reported earnings in the first quarter were 23 cents per share compared with the year-ago EPS of a penny.

Revenues of $2.75 billion in the first quarter improved 8.2% year over year on a reported basis, up 5.6% on an operational basis (at constant exchange rate or CER). Revenues grew 5.9% on an organic basis (adjusted for foreign currency fluctuations and certain recent acquisitions and divestments). The top line exceeded the Zacks Consensus Estimate by 5.3%.

The top line also exceeded first-quarter revenue growth guidance of approximately 0-6% on a reported basis and (3)-3% on an organic basis.

Q1 Revenues in Detail

In the first quarter, revenues rose 8.6% in the United States on a reported basis (same operationally). Revenues were up 9.4% in the Europe, Middle East and Africa region (up 1.9%); up 15.6% in the Asia Pacific zone (up 9.1%); down 3.8% in Latin America and Canada (down 2.2%) and up 16% in emerging markets (up 13.2%).

Segmental Analysis

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

The company generates maximum revenues from Cardiovascular. Sales from its sub segments, namely Interventional Cardiology and Peripheral Interventions were $696 million (up 7.1% year over year organically) and $433 million (up 7.7%), respectively, in the first quarter.

Boston Scientific Corporation Price, Consensus and EPS Surprise

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

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

Boston Scientific's Rhythm and Neuro business comprises Cardiac Rhythm Management (CRM), Electrophysiology and Neuromodulation. CRM reflected a 0.5% year-over-year rise in organic sales to $469 million in the reported quarter.

Electrophysiology sales grew 7.7% year over year organically to $83 million. Neuromodulation sales rose 1.7% year over year on an organic basis to $198 million.

Other segments like Endoscopy plus Urology and Pelvic Health (under the MedSurg broader group) recorded sales of $499 million (up 9.9% organically) and $361 million (up 8.8%), respectively.

The company’s Specialty Pharmaceuticals segment registered revenues of $13 million, a year-over-year decline of 44.4% on an organic basis. Notably, on Mar 1, 2021, Boston Scientific completed the sale of this business.

Margins

Gross margin in the first quarter contracted 79 basis points (bps) year over year to 67.5%. There was a 10.9% rise in the cost of products sold to $894 million.

Selling, general and administrative expenses improved 4.1% to $1.02 billion. Research and development expenses declined 8% to $276 million. Meanwhile, royalty expenses of $12 million remained unchanged year over year. Adjusted operating margin improved 244 bps to 20% in the reported quarter.

Guidance

Based on strong first-quarter results, the company has narrowed its full-year 2021 guidance.

Full-year revenue growth is expected in the range of 16-19% on a reported basis and 15-18% on an organic basis (earlier guidance was expected growth of 13-19% on a reported basis and 12-18% on an organic basis). Adjusted EPS is expected in the range of $1.53-$1.60 (earlier range was $1.50-$1.60). The current Zacks Consensus Estimate for 2021 earnings and revenues is pegged at $1.53 and $11.44 billion, respectively.

For the second quarter of 2021, revenue growth is projected in the range of approximately 46-50% on a reported basis and 44-48% on an organic basis. Adjusted earnings are expected in the range of 36-38 cents per share. The current Zacks Consensus Estimate for second-quarter earnings and revenues is pegged at 35 cents and $2.76 billion, respectively.

Our Take

Boston Scientific ended the first quarter on an extremely bullish note with adjusted earnings and revenues both surpassing the respective Zacks Consensus Estimate as well as the company’s expectations by a wide margin. The company also registered strong sequential improvement in overall financial performance.

Barring Latin America and Canada, organic revenues at each of its core business segments and geographies were up in the reported quarter. The increase in cost however resulted in gross margin contractions in the quarter. The second-quarter and the narrowed full-year 2021 guidance also look impressive.

Zacks Rank and Stocks to Consider

Boston Scientific currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space include Semler Scientific Inc. SMLR, Owens & Minor, Inc. OMI and DENTSPLY SIRONA Inc. XRAY, each carrying a Zacks Rank #2 (Buy).

Semler is expected to release results on May 3. The Zacks Consensus Estimate for the company’s first-quarter 2021 adjusted EPS is currently pegged at 48 cents. The consensus estimate for first-quarter revenues stands at $11.9 million.

Owens & Minor is scheduled to release results on May 5. The Zacks Consensus Estimate for its first-quarter 2021 adjusted EPS is currently pegged at 97 cents. The consensus estimate for first-quarter revenues stands at $2.29 billion. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DENTSPLY SIRONA is slated to release results on May 6. The Zacks Consensus Estimate for first-quarter 2021 adjusted EPS is currently pegged at 55 cents. The consensus estimate for revenues stands at $929.3 million.

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