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Can Boston Scientific (BSX) Q4 Earnings Fuel Overall Growth?

Zacks Equity Research

Boston Scientific Corporation BSX is scheduled to report fourth-quarter 2018 results, before the opening bell on Feb 6.

In the last reported quarter, the company’s earnings per share beat the Zacks Consensus Estimate by 2.94%. Moreover, it delivered positive earnings surprises in three of the trailing four reported quarters, the average beat being 7.5%.

Let’s see, how things are shaping up prior to this announcement.

Preliminary Results at a Glance

Notably, Boston Scientific recently projected an impressive fourth-quarter performance and expects to meet the upper end of its own expectations on the revenue front. In the to-be-reported quarter, Boston Scientific expects total revenue growth of 6.3% (up 8.2% on operational basis after excluding the impact of foreign currency fluctuations) on a year-over-year basis to $2.56 billion, in line with the current Zacks Consensus Estimate.

However, this meets the upper end of the company's earlier provided revenue guidance of $2.525-$2.565 billion. A firm top line is primarily expected on the back of growth across all the company's segments and geographical regions. (Read more: Boston Scientific Gains on Impressive Preliminary Q4 Results).

Key Catalysts

Alike the prior quarter, we are upbeat about strong contributions from Boston Scientific’s Cardiovascular business group, which comprises Interventional Cardiology (IC) and Peripheral Interventions (PI). In the last reported quarter, the company generated around 38% of its total revenues from this highest revenue generating segment.

Boston Scientific Corporation Price and EPS Surprise

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

We are optimistic about the IC business that will help the company maintain impressive global growth, courtesy of an innovative portfolio and robust commercial teams. Complex PCI (percutaneouscoronary intervention) products within IC are growing strongly on successful global expansion efforts. According to Boston Scientific, the global Complex PCI results are largely offsetting the recent decline in the company’s coronary drug-eluting stent business.

Within Structural Heart, we are looking forward to Boston Scientific’s WATCHMAN, ACURATE and IRIS product lines that are expected to contribute to the top line in the to-be-reported quarter. The company expects revenues from WATCHMAN and ACURATE TAVR franchise to total approximately $450 million in 2018.

This apart, the recent acquisition of Claret Medical should largely aid Structural Heart’s top line. Notably, Claret Medical brought Sentinel (the only cerebral embolic protection system approved in the United States and Europe) to Boston Scientific’s Structural Heart portfolio.

Per the preliminary fourth-quarter result, sales from the company’s IC were up 5.1% on a reported basis (up 7.6% operationally) on a year-over-year basis.

The Zacks Consensus Estimate for IC revenues is pegged at $669 million, indicating an increase of 5.2% on a year-over-year basis.

In recent quarters, the PI business consistently demonstrated a solid uptick across segments like peripheral arterial disease, venous and interventional oncology. In the last reported quarter, the company commenced the launch of Eluvia in the United States. According to Boston Scientific, Eluvia has significant market opportunity, given the large addressable patient population, differentiated, sustained-release technology and superior clinical outcomes with reduced need for reintervention. We believe, this launch will be accretive to the company’s fourth-quarter results.

Meanwhile, the preliminary release highlights the fact that in the fourth quarter, the Peripheral Interventions business was up 9.3% (up 11.4%). Accordingly, the Zacks Consensus Estimate for fourth-quarter PI revenues stands at $295 million, reflecting a 6.5% rise year over year.

Other Factors at Play

Among the other segments, MedSurg is estimated to demonstrate a steady performance led by endoscopy. Urology and Pelvic Health are also projected to surpass market levels, driven by investment strategies in the key international geographies.

Within endoscopy, the company is expected to display sturdy results, riding on a promising EndoChoice performance, particularly in pathology and infection prevention. Urology and Pelvic Health business should also continue to maintain its growth momentum on robust global performance. 

Boston Scientific’s recent acquisitions have added several products (though many are under development) with immense potential to its portfolio. The buyouts of Apama MedicalSecurus Medical in Electrophysiology, Augmenix in Urology along with EmCision in Endoscopy deserve special mention.

The company is gradually fortifying its presence in the emerging markets of Brazil, Russia, India and China (BRIC). In third-quarter 2018, business from the emerging markets registered 20% growth owing to a commendable progress in China and Latin America.

Boston Scientific is gaining traction in India as well. It is currently targeting about 10 emerging markets for additional emphasis. The company is also pinning hopes on its core cardiology segment, which is gradually stabilizing with growth in the BRIC nations. This trend is expected to sustain in the to-be-reported quarter as well.

However, the ongoing tensions between the United States and China regarding the imposition of tariffs on imports have raised concerns for major MedTech players as a single adverse move might affect top-line numbers in the coming quarters.

Overall, the Zacks Consensus Estimate for total revenues of $2.56 billion represents an increase of 6.24% from the prior-year quarter. Also, earnings estimates of 37 cents reflect an 8.8% rise on a year-over-year basis.

What Our Quantitative Model Predicts

Our proven Zacks model clearly shows that a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has high chances of beating estimates if it also has a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Boston Scientific has a Zacks Rank #2, which increases the predictive power of ESP. However, the company has an Earnings ESP of 0.00%, which makes surprise prediction difficult. Thus, this combination fails to suggest any likely earnings beat for the stock this earnings season.

Stocks Worth a Look

Here are a few medical stocks worth considering from the same space as these comprise the right mix of elements to exceed expectations this reporting cycle.

DexCom, Inc. DXCM has an Earnings ESP of +8.93% and a Zacks Rank of 2. You can see the complete list of today's Zacks #1 Rank stocks here.

MacroGenics, Inc. MGNX has an Earnings ESP of +8.15% and is a Zacks #2 Ranked player.

NanoString Technologies, Inc. NSTG has an Earnings ESP of +4.64% and a Zacks Rank of 1.

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