Earnings Preview: Boston Scientific

Boston Scientific Corporation (BSX) is scheduled to report Q3 earnings before market open Wednesday, Oct. 22, with a conference call scheduled for 8:00 am ET.

Guidance

Analysts are expecting a profit of 11c on revenue of $1.97B. The consensus range for EPS is 8c to 12c, with a revenue range of $1.90B to $2.04B, according to First Call. In Q2, the company reported EPS 20c vs. consensus of 11c and revenue of $2.02B vs. consensus of $2.01B.

Analyst Views

Positive influences for this quarter are a positive foreign currency translation, increasing revenues in cardiac rhythm management devices and neuro-modulation products. Negative factors for this quarters results include slowing growth in the defibrillator and stent markets. On October 8 the company announced adjustments to its Q3. Boston Scientific announced it expects to record the following adjustments to its Q3 results, which it plans to report on October 22rd.

As previously disclosed, the company received a $250M milestone payment from Abbott Laboratories (ABT) in July, related to Abbott's 2006 acquisition of Guidant's vascular intervention and endovascular solutions businesses. As a result, the company expects to record a pre-tax operating gain of $250M, $184M after tax or approximately 12c per share, in Q3. The company has used the proceeds of the milestone payment and cash flow to retire $500M of debt in Q3.

The company expects to record an additional pre-tax charge of $334M, $266M after tax or approximately 18c per share, in Q3 as a result of a ruling last week by a federal judge in a patent infringement case brought against the company by Johnson & Johnson (JNJ). As the company announced on October 1, the judge awarded Johnson & Johnson approximately $703M in damages and pre-judgment interest. The U.S. Supreme Court declined to hear the company's appeal on the infringement verdict in the Johnson & Johnson case.

The company also announced it expects to record a pre-tax, non-cash operating charge of $140M-$180M, $115M-$145M after tax or approximately 8c-10c per share, in Q3 in relation to impairment charges on intangible assets. As previously announced, the company expects to record a net pre-tax gain of $15M, $9M after tax or approximately 1c per share, in Q3 on the liquidation of its public and private investment portfolio.

In a recent research note from October 9, Caris says that shares should be underweighted. The firm continues to see legal risk and believes higher than expected share losses to competitors stents. Also on October 9, Banc of America noted agrees with management that the company does not have any liquidity problems and reiterates a Buy rating on the stock.