Why Is Boston Scientific (BSX) Up 2.1% Since Last Earnings Report?
A month has gone by since the last earnings report for Boston Scientific (BSX). Shares have added about 2.1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Boston Scientific due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Boston Scientific Q4 Earnings Beat Estimates, Operating Margin Dip
Boston Scientificposted adjusted earnings per share of 55 cents for the fourth quarter of 2023, up 22.2% from the year-ago figure. The figure beat the Zacks Consensus Estimate by 7.8% and also exceeded the company’s adjusted earnings per share guidance range of 49-52 cents.
The quarter’s adjustments included certain amortization expenses, acquisition/divestitures-related net charges, and restructuring and restructuring-related charges, among others.
Reported earnings per share for the fourth quarter was 34 cents, reflecting a significant improvement from the year-ago quarter figure of 9 cents.
Full-year adjusted earnings per share of $2.05 rose 19.9% from the year-ago figure. It also exceeded the Zacks Consensus Estimate by 1.9%. It also surpassed the full-year adjusted earnings per share guidance of $1.99 to $2.02.
Fourth-quarter revenues of $3.73 billion improved 14.9% year over year on a reported basis and 14.5% on an operational basis (at a constant exchange rate or CER). Revenues grew 13.6% on an organic basis (adjusted for foreign currency fluctuations and certain recent acquisitions and divestments). The top line exceeded the Zacks Consensus Estimate by 3.8%. The quarter’s top-line performance also exceeded the company’s projection of 9-11% growth on a reported basis (an increase of 8-10% organically).
Full-year total revenues were $14.24 billion, up 23.3% on a reported basis from 2022 (a 13.1% improvement on an operational basis and up 12.3% on an organic basis). The top line also exceeded the Zacks Consensus Estimate by 0.9%. It also surpassed the company’s full-year net sales growth expectation of approximately 11% on a reported as well as organic basis.
Q4 Revenues in Detail
In the fourth quarter, revenues rose 11.4% in the United States on a reported basis (same operationally).
Revenues were up 14% in the Europe, Middle East and Africa (EMEA) region (up 11.6%) and 14.8% in the Asia Pacific zone (up 17%).
Revenues increased 20.8% in Latin America and Canada (up 14.6%).
Reported revenue growth in emerging markets was 16.3% (up 18.7% operationally).
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 $1.75 billion (up 14.2% year over year organically) and $533 million (up 12.2%), respectively, in the fourth quarter.
Within MedSurg, Endoscopy generated revenues of $645 million, up 12.2% organically.
Urology revenues were $527 million, reflecting organic growth of 9.9%.
Neuromodulation within MedSurg reported $269 million in revenues, reflecting a 2.6% organic rise year over year.
Margins
Gross margin in the fourth quarter expanded 42 basis points (bps) year over year to 69.2%. There was a 13.4% rise in the cost of products sold to $1.15 billion in the reported quarter.
Selling, general and administrative expenses rose 18.6% to $1.38 billion. Research and development expenses rose 10% to $363 million. Royalty expenses of $12 million declined 7.7% year over year. Adjusted operating margin contracted 22 bps to 22.1% in the reported quarter.
2024 Guidance
Boston Scientific provided its full-year and first-quarter 2024 projections.
Full-year net sales growth is expected to be approximately 8.5-9.5% on a reported basis and approximately 8-9% on an organic basis. The Zacks Consensus Estimate is currently pegged at $15.32 billion, indicating a 7.6% rise from the 2023 reported figure. Full-year adjusted earnings per share is expected in the range of $2.23 to $2.27. The Zacks Consensus Estimate is currently pegged at $2.23.
For the first quarter of 2024, revenue growth is projected in the range of approximately 7.5-9.5% on a reported basis (an increase of 7-9% organically). Adjusted earnings are expected in the range of 50-52 cents per share. The Zacks Consensus Estimate for first-quarter earnings and revenues is pegged at 52 cents and $3.68 billion, respectively.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Boston Scientific has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Boston Scientific has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Boston Scientific is part of the Zacks Medical - Products industry. Over the past month, Stryker (SYK), a stock from the same industry, has gained 2.5%. The company reported its results for the quarter ended December 2023 more than a month ago.
Stryker reported revenues of $5.82 billion in the last reported quarter, representing a year-over-year change of +11.8%. EPS of $3.46 for the same period compares with $3 a year ago.
Stryker is expected to post earnings of $2.35 per share for the current quarter, representing a year-over-year change of +9.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -3%.
Stryker has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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