Seeking Alpha
Profile| Send Message| ()  

Boston Scientific (BSX) continues to suffer end market weakness in the third quarter too. Two of their top segments' revenue dipped 18.1 percent and 7.8 percent respectively in the third quarter from the first quarter of 2012.

The company reported adjusted earnings of 16 cents a share for the third quarter on $1.74 billion revenue. Sales recorded a year-over-year fall of 7 percent, while the drop is 5 percent on a constant currency basis. On a GAAP basis, Boston suffered a loss of 52 cents a share. While adjusted EPS topped estimates, revenues fell shy of analysts' expectations of $1.76 billion.

Segments

Revenues in Million

% of Growth or De-growth over Q2

% of Growth or De-growth over Q1

Q1

Q2

Q3

Total Core Business Revenue

1837

1798

1703

-2.12%

-7.29%

Interventional Cardiology

603

549

494

-8.96%

-18.08%

Cardiac Rhythm Management

501

488

462

-2.59%

-7.78%

Endoscopy

302

311

310

2.98%

2.65%

Peripheral Interventions

190

196

189

3.16%

-0.53%

Urology/Women's Health

120

126

125

5.00%

4.17%

Neuromodulation

84

91

88

8.33%

4.76%

Electrophysiology

37

37

35

0.00%

-5.41%

Figures taken from Boston Scientific

The above table indicates widening of weakness in the top two segments, namely, Interventional Cardiology and Cardiac Rhythm Management or CRM, in the third quarter compared to the first two quarters. Three divisions, Endoscopy, Urology/Women's Health and Neuromodulation managed to post gains in the third quarter from the first quarter. However, these were not enough for the company to offset the weakness in other segments.

The company also suffered year-over-year market share loss of about 5 percentage points in the drug-eluting stents during the third quarter primarily due to Medtronic's (MDT) US Resolute stent launch. In a research note to clients, Goldman Sachs analyst David Roman said, "We estimate BSX lost about 500 bp of share yoy in CY3Q (due primarily to Medtronic's US Resolute stent launch), with a double-digit bp decline in US share, offset slightly by 150 bp of OUS share gain. On the P&L, adjusted operating margins were 10 bp below our estimate, as cost restructuring programs appear only to be offsetting weak end markets and top line growth rates."

Going forward, Boston Scientific expects fourth quarter adjusted EPS of 15 - 18 cents, while GAAP EPS is targeted between 6 and 9 cents. Revenue is guided in the $1.74 - $1.815 billion range for the same period. Street analysts expect EPS of 12 cents and revenues of $1.80 billion.

Similarly, the company projects sales of $7.168 to $7.243 billion for the full year, while adjusted EPS is targeted between 63 and 66 cents. On a GAAP basis, Boston sees a loss of $2.89 - $2.86 a share. Analysts' predict EPS of 43 cents and revenues of $7.27 billion.

Boston Scientific's revenue projection for the fourth quarter and full year indicate a fall of 2.6 percent and 4.7 percent respectively suggesting continued weakness in its top two divisions. The company's shares are currently trading below the 50-day and 200-day moving average of $5.65 and $5.70, respectively. However, during the conference call, the company's CEO Hank Kucheman viewed the share price as undervalued.

Meanwhile, analyst David Roman summed up by saying, "We think 3Q results point to continued end-market weakness, and against this backdrop, we estimate Boston continues to lose share in its core business segments. We maintain our Sell rating".

Source: Earnings Review: Boston Scientific Continues To Suffer End Market Weakness