Boston Scientific Q2 results beat Street expectations
Boston Scientific Corporation (
), a leading manufacturer of medical devices and products used in a broad range of interventional medical specialties, reported a strong second quarter of fiscal 2009 results. Excluding special items, adjusted EPS was $0.20, same as that in the year-ago quarter but ahead of Street expectations of $0.14.
Quarterly results
Net Sales
Net sales for the quarter were $2,074 million, an increase of 2% y/y. Excluding the unfavorable impact of foreign exchange (FX), net sales increased 7% y/y. Growth was seen across all the major business segments as depicted below:
In the Cardiac Rhythm Management (
) segment, ICD sales increased roughly 8% y/y to $454 million in the quarter. Pacemaker sales declined roughly 2% y/y to $155 million. In the Cardiovascular segment, total coronary stent sales increased 10% y/y to $484 million.
Margins
Gross margin declined 60 basis points (bps) y/y to 69.6% in the quarter. The company reported a number of one-time items that coupled with a lower gross margin were a drag on operating margin. However, lower interest and other non-operating expenses helped the company to increase its net margin.
EPS
Net income in the quarter was $158 million or $0.10 per share, compared to a net income of $98 million or $0.07 per share in the year-ago quarter. The company reported a number of one-time items like intangible asset impairment, acquisition-related charges, amortization expense, etc. in both the comparable quarters.
Excluding these items, adjusted net income was $297 million or $0.20 per share, compared to an adjusted net income of $304 million or $0.20 per share in the year-ago quarter.
Guidance
Management has provided guidance for the third quarter and full fiscal year 2009. For the third quarter, net sales are estimated between $2.0 billion and $2.1 billion. GAAP EPS is estimated in the range of $0.08 to $0.13. Non-GAAP EPS is estimated in the range of $0.17 to $0.21.
For full fiscal year 2009, net sales are estimated between $8.1 billion and $8.4 billion. GAAP EPS is estimated in the range of $0.47 to $0.53. Non-GAAP EPS is estimated in the range of $0.82 to $0.86.
Boston Scientific faces significant competition across its product portfolio. Primary competitors include
Johnson & Johnson (
),
Medtronic Inc. (
),
Abbott Laboratories (
) and
St. Jude Medical, Inc. (
).
The stock is reasonably valued considering the company’s dominant position in the industry and the inelastic demand profile of its products. We believe the recent approvals and launches will improve its 2009 outlook.
Additionally, the pipeline of new products in the cardiovascular segment offers the potential for outperforming 2009 expectations. As such, we continue to rate Boston Scientific a Buy.
