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Boston Scientific (BSX) Q1 Earnings Miss, Margins Decline
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Boston Scientific Corporation (BSX - Free Report) posted adjusted earnings per share (EPS) of 28 cents in the first quarter of 2020, down 20% from the year-ago figure. Earnings missed the Zacks Consensus Estimate by 15.2%. Moreover, the figure lagged the company’s guided range of 37-40 cents. The adjustments take into consideration certain amortization expenseand impairment chargesamong others.
Reported EPS in the first quarter was a penny, substantially below the year-ago earnings of 30 cents per share.
The significant earnings decline indicates the severe impact of the COVID-19 outbreak on the company’s global sales during the quarter. We note that the coronavirus mayhem forced the corporate sector to halt production and supply globally.
Revenues in the first quarter rose 2% year over year on a reported basis, up 3.2% on an operational basis (at constant exchange rate or CER). However, revenues declined 2.9% on an organic basis (adjusted for foreign currency fluctuations and certain recent acquisitions and divestments) to $2.54 billion. The top line beat the Zacks Consensus Estimate of $2.52 billion by 0.8%.
Q1 Revenues in Detail
In the first quarter, the company achieved 3.5% growth in the United States on a reported basis (same operationally). Revenues declined 1.6% decline in the Europe, Middle East and Africa region (up 1.3%); 6.4% in the Asia Pacific zone (down 4.8%); 3.1% in Latin America and Canada (up 3.6%) and 10.1% in the emerging markets (down 5.4%).
Segmental Analysis
Boston Scientific currently has three global reportable segments: Cardiovascular, Rhythm and Neuro plus MedSurg.
Boston Scientific Corporation Price, Consensus and EPS Surprise
The company generates maximum revenues from Cardiovascular. Sales from its sub segments, namely Interventional Cardiology and Peripheral Interventions were $633 million (down 2.7% year over year organically) and $392 million (down 2.1%), respectively, in the first quarter.
Boston Scientific's Rhythm and Neuro business comprises Cardiac Rhythm Management (CRM), Electrophysiology and Neuromodulation.CRM reflected a 9.9% year-over-year decline in organic sales to $437 million in the reported quarter.
Electrophysiology sales were down 5.2% year over year, organically, to $74 million. Neuromodulation sales declined 6.6% year over year on an organic basis to $191 million.
Other segments like Endoscopy plus Urology and Pelvic Health (under the MedSurg broader group) recorded sales of $442 million (up 1.5% organically) and $332 million (up 2.9%), respectively.
Margins
Gross margin in the first quarter contracted 241 basis points (bps) year over year to 68.3% due to a 10.4% rise in the cost of products sold.
Adjusted operating margin declined 641 bps to 17.6% in the reported quarter. Selling, general and administrative expenses increased 12.5% to $978 million while research and development expenses rose 7.1% to $300 million. Meanwhile, royalty expenses of $12 million fell 25% year over year.
Guidance
The uncertainties regarding the duration and impact of the coronavirus pandemic on the company’s overall business have compelled Boston Scientific to suspend its previously-issued 2020 financial guidance.
Our Take
Boston Scientific delivered disappointing earnings and revenues for the first quarter. Sales at most of its core business segments were significantly down in the reported quarter, affected by lower demand for non-COVID-19 healthcare products and elective procedures.
On a positive note, the company has been leaving no stone unturned to strengthen its core businesses and invest in new technologies as well as global markets. In the quarter too, the company received a number of regulatory approvals for its core products globally. It received CE Mark approvals for its ACURATE neo2 Aortic Valve System and SpyGlass Discover Digital Catheter. It also received FDA approval for the DIRECTSENSE RF Technology.
In terms of COVID-19 related health support, Boston Scientific worked in collaborations with the University of Minnesota and others to develop Coventor, a low-cost ventilator alternative. This received FDA’s Emergency Use Authorization in April.
Zacks Rank and Stocks to Consider
Currently, Boston Scientific carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader medical space are ResMed Inc. (RMD - Free Report) , Aphria Inc. and ViewRay, Inc. . All the three stocks carry a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for ResMed’s third-quarter fiscal 2020 revenues is pegged at $715.6 million, suggesting year-over-year improvement of 8.1%. The same for EPS stands at $1, indicating growth of 12.4% from the year-ago reported figure.
The Zacks Consensus Estimate for Aphria’s fourth-quarter fiscal 2020 revenues is $100.3 million, implying a 4.4% increase from the year-earlier reported figure.
The Zacks Consensus Estimate for ViewRay’s first-quarter 2020 bottom line stands at a loss of 20 cents per share, suggesting 41.2% improvement from the year-ago quarter.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Boston Scientific (BSX) Q1 Earnings Miss, Margins Decline
Boston Scientific Corporation (BSX - Free Report) posted adjusted earnings per share (EPS) of 28 cents in the first quarter of 2020, down 20% from the year-ago figure. Earnings missed the Zacks Consensus Estimate by 15.2%. Moreover, the figure lagged the company’s guided range of 37-40 cents. The adjustments take into consideration certain amortization expenseand impairment chargesamong others.
Reported EPS in the first quarter was a penny, substantially below the year-ago earnings of 30 cents per share.
The significant earnings decline indicates the severe impact of the COVID-19 outbreak on the company’s global sales during the quarter. We note that the coronavirus mayhem forced the corporate sector to halt production and supply globally.
Revenues in the first quarter rose 2% year over year on a reported basis, up 3.2% on an operational basis (at constant exchange rate or CER). However, revenues declined 2.9% on an organic basis (adjusted for foreign currency fluctuations and certain recent acquisitions and divestments) to $2.54 billion. The top line beat the Zacks Consensus Estimate of $2.52 billion by 0.8%.
Q1 Revenues in Detail
In the first quarter, the company achieved 3.5% growth in the United States on a reported basis (same operationally). Revenues declined 1.6% decline in the Europe, Middle East and Africa region (up 1.3%); 6.4% in the Asia Pacific zone (down 4.8%); 3.1% in Latin America and Canada (up 3.6%) and 10.1% in the emerging markets (down 5.4%).
Segmental Analysis
Boston Scientific currently has three global reportable segments: Cardiovascular, Rhythm and Neuro plus MedSurg.
Boston Scientific Corporation Price, Consensus and EPS Surprise
Boston Scientific Corporation price-consensus-eps-surprise-chart | Boston Scientific Corporation Quote
The company generates maximum revenues from Cardiovascular. Sales from its sub segments, namely Interventional Cardiology and Peripheral Interventions were $633 million (down 2.7% year over year organically) and $392 million (down 2.1%), respectively, in the first quarter.
Boston Scientific's Rhythm and Neuro business comprises Cardiac Rhythm Management (CRM), Electrophysiology and Neuromodulation.CRM reflected a 9.9% year-over-year decline in organic sales to $437 million in the reported quarter.
Electrophysiology sales were down 5.2% year over year, organically, to $74 million. Neuromodulation sales declined 6.6% year over year on an organic basis to $191 million.
Other segments like Endoscopy plus Urology and Pelvic Health (under the MedSurg broader group) recorded sales of $442 million (up 1.5% organically) and $332 million (up 2.9%), respectively.
Margins
Gross margin in the first quarter contracted 241 basis points (bps) year over year to 68.3% due to a 10.4% rise in the cost of products sold.
Adjusted operating margin declined 641 bps to 17.6% in the reported quarter. Selling, general and administrative expenses increased 12.5% to $978 million while research and development expenses rose 7.1% to $300 million. Meanwhile, royalty expenses of $12 million fell 25% year over year.
Guidance
The uncertainties regarding the duration and impact of the coronavirus pandemic on the company’s overall business have compelled Boston Scientific to suspend its previously-issued 2020 financial guidance.
Our Take
Boston Scientific delivered disappointing earnings and revenues for the first quarter. Sales at most of its core business segments were significantly down in the reported quarter, affected by lower demand for non-COVID-19 healthcare products and elective procedures.
On a positive note, the company has been leaving no stone unturned to strengthen its core businesses and invest in new technologies as well as global markets. In the quarter too, the company received a number of regulatory approvals for its core products globally. It received CE Mark approvals for its ACURATE neo2 Aortic Valve System and SpyGlass Discover Digital Catheter. It also received FDA approval for the DIRECTSENSE RF Technology.
In terms of COVID-19 related health support, Boston Scientific worked in collaborations with the University of Minnesota and others to develop Coventor, a low-cost ventilator alternative. This received FDA’s Emergency Use Authorization in April.
Zacks Rank and Stocks to Consider
Currently, Boston Scientific carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader medical space are ResMed Inc. (RMD - Free Report) , Aphria Inc. and ViewRay, Inc. . All the three stocks carry a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for ResMed’s third-quarter fiscal 2020 revenues is pegged at $715.6 million, suggesting year-over-year improvement of 8.1%. The same for EPS stands at $1, indicating growth of 12.4% from the year-ago reported figure.
The Zacks Consensus Estimate for Aphria’s fourth-quarter fiscal 2020 revenues is $100.3 million, implying a 4.4% increase from the year-earlier reported figure.
The Zacks Consensus Estimate for ViewRay’s first-quarter 2020 bottom line stands at a loss of 20 cents per share, suggesting 41.2% improvement from the year-ago quarter.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2020 today >>