Boston Scientific Corp (BSX, Financial), , the world's smallest implantable cardioverter-defibrillator manufacturer, delivered robust Q4 2014 results with $1.887 billion worth of sales generated during the fourth quarter, well within the company’s guidance range of $1.875-1.925 billion. The figure represents a year-over-year growth of 7% in operational revenue, delivering 5% growth to $0.22 in earnings per share compared to $0.21 a year ago. However, GAAP earnings dropped 19% from $0.08 a share in 2013 to $0.06 a share. The company’s performance is attributed to robust growth in emerging markets, which witnessed a 17% year over year growth in the fourth quarter, contributing 10 percent of overall sales. Consequently, Boston Scientific shares saw a 4.3% climb in the post-result early trading to reach an over 7 year high figure of $15.28.
Litigation, Intangible Asset Charges Drag Down Earnings
Boston Scientific posted full year sales of $7.380bn for FY2014, representing a 6% growth in operational revenue (or 3.3% growth in reported revenue), well within the company’s guidance of $7.370–$7.420bn. The company also delivered 15% growth in annual adjusted earnings per share to $0.84 from the prior year’s figure of $0.73. Although net income for Q4 2014 increased 4.4% to $303 million from $108 million in the year ago quarter, one time charges including litigation and amortization expenses, restructuring charges, acquisition-related expenditure and other intangible asset charges dragged the net income down to $87 million. The company has been fighting a legal battle with rival Johnson & Johnson (JNJ, Financial) since the last eight years over the acquisition bid for device maker Guidant. Boston Scientific also logged in consolidated GAAP earnings of $0.20 a share, compared to a ($0.09) loss in GAAP in the year ago period.
Sales grow across most segments
Boston Scientific saw growth across most of its divisions in Q4 2014, with its largest segment, Interventional Cardiology, witnessing a 10% year-on-year growth with $523 million worth of sales. While the company’s Peripheral Interventions division also clocked a 10% growth year-on-year, its Cardiac Rhythm Management segment that contributes more than 26 percent of Boston Scientific’s top line logged in a moderate 3 percent growth. Sales in Peripheral Cardiology and Cardiac Rhythm Management touched $523 million and $468 million respectively, for the fourth quarter.
While other segments such as Endoscopy and Urology/Women’s Health recorded sales of $340 million (up 5% ) and $140 million (up 9%) respectively, sales for Neuro-modulation fell 2% year on year in the last quarter. Boston Scientific’s Electrophysiology segment also reported a solid 23% sales growth, driven mainly by the Rhythmic mapping and navigation system that received FDA approval in the year 2013.
Outlook for 2015
For FY2015, Boston Scientific projected annual revenue in the $7.3-$7.5 billion range, representing a 3%-6% growth on an operational basis, on the back of growth in major businesses and increasing acceptance of new products such as Promus PREMIER Stents, SYNERGY, bronchial thermoplasty system Alair and S-ICDs (Subcutaneous-Implantable Cardioverter Defibrillators). The company’s earnings for Q1 2015 are expected to fall in the $1.74-$1.8 billion range, translating to $0.19-$0.21 cents earnings per share. The company also foresees annual adjusted earnings per share in the 88-92 cents range. The figures fall well within consensus estimates drawn by market experts.
In comparison, with better price to earnings ratio as well as projected GAAP earnings per share for 2015, rivals St. Jude Medical (STJ, Financial) (estimated EPS of $3.50-US3.55) and Medtronic Plc. (MDT, Financial) (estimated EPS of around $3.7) seem to be more lucrative bets for investors at the moment. However, with Boston Scientific projected to see a steady climb in revenue and earnings per share through 2015, existing shareholders would do well to hold on to their stock.
