Boston Scientific (BSX) Q3 Earnings Beat, Gross Margin Dips
Boston Scientific Corporation BSX posted adjusted earnings per share (EPS) of 50 cents for the third quarter of 2023, up 16.3% from the year-ago figure. The figure also exceeded the Zacks Consensus Estimate by 4.2%. The figure exceeded the company’s adjusted earnings per share guidance range of 46-48 cents.
The quarter’s adjustments included certain amortization expenses, acquisition/divestitures-related net charges, restructuring and restructuring-related charges and European Union Medical Device Regulation implementation costs, among others.
The reported EPS for the third quarter was 34 cents, reflecting a significant improvement from the year-ago quarter EPS figure of 12 cents.
Third-quarter revenues of $3.53 billion improved 11.2% year over year on a reported basis and 11.1% on an operational basis (at a constant exchange rate or CER). Revenues grew 10.2% on an organic basis (adjusted for foreign currency fluctuations and certain recent acquisitions and divestments). The top line exceeded the Zacks Consensus Estimate by 1.7%. The quarter’s top-line performance also exceeded the company’s projection of 8.5-10.5% growth on a reported basis (an increase of 7-9% organically).
Q3 Revenues in Detail
In the third quarter, revenues rose 8.5% in the United States on a reported basis (same operationally). This compares to our model estimate of 6.6% growth year over year on a reported and operational basis.
Revenues were up 14.7% in the Europe, Middle East and Africa (EMEA) region (up 10.9%) and 14.8% in the Asia Pacific zone (up 19.5%). The revenue growth projection for EMEA was 16% on a reported basis (a projected improvement of 14.4% operationally) per our model. The same for APAC was 10.7% on a reported basis and 9.7% operationally.
Revenues increased 22% in Latin America and Canada (up 16.1%). For Latin America and Canada, our estimate for year-over-year reported growth was 6.8% (an improvement of 6.6% operationally).
Reported revenue growth in emerging markets was 14.4% (up 19% operationally).
Boston Scientific Corporation Price, Consensus and EPS Surprise
Boston Scientific Corporation price-consensus-eps-surprise-chart | Boston Scientific Corporation Quote
Segmental Analysis
Boston Scientific recently reorganized its operational structure and aggregated its core businesses, each of which generates revenues from the sale of Medical Devices, into two reportable segments, MedSurg and Cardiovascular.
The company generates maximum revenues from Cardiovascular. Sales from its sub-segments, Cardiology and Peripheral Interventions, were $1.65 billion (up 11.4% year over year organically) and $538 million (up 8.4%), respectively, in the third quarter.
Going by our model, third-quarter Cardiology revenues were estimated to be $1.59 billion, implying 6% organic growth on a year-over-year basis. Our estimate for Peripheral Interventions revenues was pegged at $531.9 million, implying 10.3% organic growth.
Within MedSurg, Endoscopy generated revenues of $629 million, up 10.6% organically. Our model predicted revenues of $618.4 million, suggesting 8.2% organic growth.
Urology revenues were $483 million, reflecting organic growth of 11.1%. Our model estimated revenues to be $459.9 million, implying 5.8% organic growth.
Neuromodulation within MedSurg reported $229 million in revenues, reflecting a 3.2% rise organically year over year. Our model estimate was $260.7 million, indicating 17.6% organic growth.
Margins
Gross margin in the third quarter contracted 33 basis points (bps) year over year to 68.8%. There was a 12.5% rise in the cost of products sold to $1.10 billion in the reported quarter.
Selling, general and administrative expenses rose 9.7% to $1.24 billion. Research and development expenses rose 5% to $356 million. Royalty expenses of $11 million remained unchanged year over year. Adjusted operating margin expanded 80 bps to 23.2% in the reported quarter.
2023 Guidance
Boston Scientific updated its full-year guidance and provided fourth-quarter 2023 projections.
Full-year net sales growth is now expected to be approximately 11% on a reported as well as organic basis (earlier estimate was 10.5-11.5% reported growth and 10-11% organic growth). The Zacks Consensus Estimate is currently pegged at $14.07 billion, indicating a 10.9% rise from the 2022 reported figure. Full-year adjusted EPS is expected in the range of $1.99 to $2.02 ($1.96 to $2.00). The Zacks Consensus Estimate is currently pegged at $1.99.
For the fourth quarter of 2023, revenue growth is projected in the range of approximately 9-11% on a reported basis (an increase of 8-10% organically). Adjusted earnings are expected in the range of 49-52 cents per share. The current Zacks Consensus Estimate for fourth-quarter earnings and revenues is pegged at 51 cents and $3.62 billion, respectively.
Our Take
Boston Scientific's third-quarter 2023 adjusted earnings and revenues exceeded the respective Zacks Consensus Estimate. The company registered a strong year-over-year improvement in organic sales, indicating a solid rebound in the legacy business even amid several macroeconomic issues.
Organic and operational revenues at its core business segments and geographies were up in the reported quarter. However, the rise in costs and expenses put pressure on the company’s bottom line.
Zacks Rank and Other Key Picks
Boston Scientific currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the broader medical space that are supposed to report earnings soon are Addus HomeCare ADUS, Insulet PODD and Inari Medical NARI.
Addus currently carries a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for its third-quarter 2023 adjusted EPS is pegged at $1.05. The same for its revenues stands at $266.2 million.
Addus has a long-term historical growth rate of 12.6%. ADUS’ earnings yield of 5.24% compares favorably with the industry’s yield of 4.37%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Insulet’s third-quarter 2023 adjusted EPS is currently pegged at 40 cents. The consensus estimate for revenues is pegged at $413.8 million. Insulet currently carries a Zacks Rank #2.
Insulet has an estimated long-term growth rate of 41.5%. PODD’s earnings yield is 1.14% against the industry’s -2.62%.
Inari Medical currently has a Zacks Rank #2. The Zacks Consensus Estimate for its third-quarter 2023 adjusted EPS is currently pegged at a breakeven level. The same for revenues is pegged at $122.4 million.
NARI has an estimated growth rate of 107.3% for 2023. NARI’s earnings yield is 0.07% against the industry’s yield of -8.47%.
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