Why Is Boston Scientific (BSX) Down 1.4% Since Last Earnings Report?

It has been about a month since the last earnings report for Boston Scientific (BSX). Shares have lost about 1.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Boston Scientific due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Boston Scientific Sees Robust Q2 Sales Across Core Segments

Boston Scientific posted adjusted earnings per share of 40 cents for the second quarter of 2021, which marked a 400% surge from the year-ago figure. The figure topped the Zacks Consensus Estimate by 8.1% and also exceeded the adjusted earnings per share guidance range of 36 cents to 38 cents. The quarter’s adjustments include certain amortization expenses, litigation-related charges, acquisition/divestitures-related net charges and investment portfolio net losses among others.

Reported earnings in the second quarter were 12 cents per share against the year-ago loss of 11 cents per share.

Revenues of $3.08 billion in the second quarter improved 53.6% year over year on a reported basis and 49.6% on an operational basis (at constant exchange rate or CER). Revenues grew 52.4% on an organic basis (adjusted for foreign currency fluctuations and certain recent acquisitions and divestments). The top line exceeded the Zacks Consensus Estimate by 4.4%.

The top line also exceeded second-quarter revenue growth guidance of approximately 46-50% on a reported basis and 44-48% on an organic basis.

Q2 Revenues in Detail

In the second quarter, revenues rose 70.1% in the United States on a reported basis (same operationally). Revenues were up 59.3% in the Europe, Middle East and Africa region (up 47.1%); 27% in the Asia Pacific zone (up 21.1%); 86.1% in Latin America and Canada (up 73.9%) and 33.8% in emerging markets (up 25.8%).

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 $790 million (up 55.2% year over year organically) and $473 million (up 35.6%), respectively, in the second quarter.

Boston Scientific's Rhythm and Neuro business comprises Cardiac Rhythm Management (CRM), Electrophysiology and Neuromodulation.

CRM reflected a 31.2% year-over-year rise in organic sales to $524 million in the reported quarter.

Electrophysiology sales grew 78.7% year over year organically to $95 million.

Neuromodulation sales rose 98% year over year on an organic basis to $247 million.

Other segments like Endoscopy plus Urology and Pelvic Health (under the MedSurg broader group) recorded sales of $551 million (up 54.1% organically) and $397 million (up 70.8%), respectively.

On Mar 1, 2021, Boston Scientific completed the sale of its Specialty Pharmaceuticals segment.

Margins

Gross margin in the second quarter expanded 878 basis points (bps) year over year to 69.3%. There was a 19.5% rise in the cost of products sold to $945 million.

Selling, general and administrative expenses rose 40.4% to $1.12 billion. Research and development expenses increased 23.1% to $298 million. Meanwhile, royalty expenses of $12 million increased 50% year over year. Adjusted operating margin improved 1459 bps to 22.8% in the reported quarter.

Guidance

Based on robust second-quarter results, the company increased its full-year 2021 guidance.

Full-year net sales growth is expected in the range of 21-22% on a reported basis and 19-20% on an organic basis (earlier guidance was expected growth of 16-19% on a reported basis and 15-18% on an organic basis).

Adjusted earnings per share is expected in the range of $1.58-$1.62 (earlier range was $1.53-$1.60). The current Zacks Consensus Estimate for 2021 earnings and revenues is pegged at $1.58 and $11.74 billion, respectively.

For the third quarter of 2021, revenue growth is projected in the range of approximately 12-14% on both reported and organic basis. Adjusted earnings are expected in the range of 39-41 cents per share. The current Zacks Consensus Estimate for third-quarter earnings and revenues is pegged at 40 cents and $2.97 billion, respectively.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

At this time, Boston Scientific has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, 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 upward for the stock, and the magnitude of these revisions has been net zero. Notably, Boston Scientific has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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