Boston Scientific Corporation

 

BSX, after a period of stagnation, has been experiencing a reinvigoration of its business as their R&D efforts and focus on growth markets has started to show results.  BSX is a Med Tech (Medical Technology) company with a market cap in excess of $30 billion.  They have a broad portfolio that they aggregate into Cardiovascular, Rhythm Management, and Medical Surgery. 

Ests      2Q19   3Q19   FY19    FY20

Revs    2.64b   2.65     10.65   11.67   

EPS      .38       .39       1.56     1.79

                                    +11%   +15%

 

P=35.89, Debt=7bn, D/C=50% but 35% factoring WC surplus, D/EBITDA 2.6X, TTM EPS 1.42, P/E=25X, FY19 P/E=23X

 

2Q19   .39 vs .41, -4.9%, est .38

  • July 24, 2019, P=42.88, TTM EPS=1.47, P/E=29X, FY20 P/E=24X

  • Revs +5.6% to 2.63bn, +6.3% organic, GM 71.2% vs 71.3%, OM 25.5% vs 25.4%, OpInc +6.2%

  • Cardio +6.3% to 1.03bn, Rhythm and Neuro +1.4% to 786m, MedSurg +9.5% to 818m

  • 3Q Guidance: Revs +9-10%, adj EPS .37-.39 (vs .35, est .39)

  • FY19 Guidance unchanged (1.54-1.58) implies 2H 84-.84 (+9.6% to +15%), implying 4Q .43-.45, +13-18% y/y

  • Guidance does not factor acquisition of BTG (announced in 2018, expected to close in August).

  • From investor day in June, mgmt. expects CAGR organic growth to 6-9% in 2020-2022 with OM expansion of 50-100bps annually (long-term outlook >30% OM), and double-digit EPS growth

1Q19   .35 vs .33 +6%, est .36

  • Apr 24, 2019, P=35.89, TTM EPS=1.42, P/E=25X, FY19 P/E=23X

  • Revs +4.8% to 2.49bn, +6.3% organic, GM 71.4% vs 72.3%, OM 25.6% vs 25.3%

  • Cardio +4.2% to 972m, Rhythm and Neuro +2.8% to 757m, MedSurg +7.7% to 766m

  • Surgical mesh issue hit 1Q adj Net Income by 11m (almost .01 to EPS), expect 30m rev impact for FY19

  • Guidance: 2Q Revs +5-7%, EPS .37-.39 (est .39)

  • FY19 Revs tempered slightly to +7-8% reported, EPS bumped up slightly to 1.54-1.58, cadence still appears be accelerating in 2H and into 2020.

4Q18   .38 vs .34, +12% ex .01 tax benefit, est .37, FY18 EPS=1.40 vs 1.26 ex tax benefit, +11%

  • Feb 6, 2019, P=37.75, TTM EPS=1.40, P/E=27X, FY19 P/E=24X

  • Revs +6.3% to 2.56bn, +7% organic, GM 72.8% vs 72.6%, OM 25.5% vs 25.6%, OpInc +5.8%

  • Cardio +7.9% to 3.8bn, Rhythm and Neuro +8.3% to 3.0bn, MedSurg +9.7% to 3bn

  • FY19 Guidance: Revs +7-9% reported, +7-8.5% organic, adj EPS 1.53-1.58 (+9-13%, est 1.58)

  • 1Q Revs +6-7% or +7-8% organic, adj EPS .35-.36 (vs .33, est .37)

  • Expect long-term tax rate to be ~13% compared to 15% previously expected

  • Acquisitions and organic growth contributing to steady results, stock continues to look pricey in this environment but longer-term growth opportunity remains.

Mid Quarter Update

  • Nov 20, 2018

  • BSX to buy BTG plc for $4.2bn, expected to close 1H 2019

  • BTG’s largest business unit is Interventional Medicine including interventional oncology (for kidney, liver, and other cancers). They also have the EKOS Endovascular System which, in combination with clot-dissolving drugs, breaks down blood clots.  They also have a pharmaceutical business with acute care antidotes to treat overexposure to medicines or toxins.  They also license out BTG intellectual property.  

  • To be funded with cash on hand and debt.  Expected to be mildly accretive in FY19 (.02-.03 to EPS) with growth beyond. 

3Q18   .35 vs .31, +13%, est .34

Oct 24, 2018, P=36.03, TTM EPS=1.37, P/E=26X, FY19 P/E=23X

  • Revs +7.7% to 2.39bn, +8.7% organic, GM 71.9% vs 71.3%, OM 25.6% vs 25.1%, OpInc +9.9%

  • Cardio +5.9% to 908m, Rhythm and Neuro +7.4% to 740m, MedSurg +10.3% to 746m

  • U.S. +9.4% and Emerging Markets +11.1%

  • 4Q Guidance: Revs 2.525-2.565bn (+5-7%, +6-7% organic), adj EPS .ex .06 investment of 2Q benefit 36-.38 (est .36) 

  • FY Guidance slightly lowered to 9.787-9.827bn (+8-9%), organic ~+7%, tightened adj EPS 1.38-1.40 vs previous range 1.37-1.41

  • Stock holding in well despite a very weak environment, nervous investors, 

  • Outlook for FY19 and FY20 for revs to grow 7-10% pa and 50-100bp improvement in OM

  • Decent steady results, stock is looking a bit pricey.  

2Q18 .35 vs .32, +9% ex tax benefit, est .34 

  • July 25, 2018, P=33.57, TTM EPS=1.39, P/E=24X

  • Revs +10.3% to 2.49bn, +7.9% organic, GM 71.3% vs 72.8%, OM 25.4% vs 26.0%, OpInc +7.8%

  • Cardio +10%, Rhythm and Neuro +10.8%, MedSurg +10.4%

  • EMEA +15.8%, Asia Pac +12.3%, U.S. +7.9%, Emerging Markets +22%

  • Guidance: 3Q Revs 2.38-2.42bn (+7-9%, est 2.39bn), EPS .33-.35, est .34

  • Tightened FY Revs to 9.8-9.88bn (+8-9%) but raised organic growth from 5-7% to 6-7%, EPS unchanged 1.37-1.41 despite higher headwind from fx, for FY18, the .06 tax benefit in 2Q will be negated in 4Q

1Q18   .33 vs .29, est .32

  • Revs +10.1% to 2.38bn, +5.2% organic, OM 25.3% vs 23%, OpInc +21.5%

  • Cardio +9.5%, Rhythm and Neuro +10.2%, MedSurg +10.9%

  • Guidance: 2Q Revs 2.45-2.5bn (+9-11% est 2.44bn), EPS .33-.35, est .35

  • Raised FY Revs 9.75-9.9bn (+8-10%), EPS 1.37-1.41

  • Solid results, various produce launches and clinical milestones in FY18 and FY19-21 to drive continued growth.

4Q17   .34 vs .30, est .34, FY17 EPS 1.26 vs 1.11

  • Revs +9.9% to 2.41bn, +6.8% organic

  • Cardio +8.7%, Rhythm Management +5.4%, MedSurg +14.2%

  • Guidance: 1Q18 Revs 2.32-2.35bn (+7-9%, est 2.32), EPS .30-.32 (vs .29, est .32)

  • FY18 9.65-9.8bn (+7-8%, est 9.61b), EPS 1.35-1.39 (+7-10%, est 1.38), see solid growth in revs and EPS over next 3 years.

3Q17   .31 vs .27, est .31

  • Revs +5.6% to 2.22bn, organic +4.3%

  • Cardio +4.1%, Rhythm Management +1.5%, MedSurg +10.2%

  • Guidance: 4Q Revs 2.345-2.375bn, EPS .32-.35 (est .34), FY Revs 8.985-9.015b (+7-8%), EPS 1.24-1.27

2Q 17     .32 vs .27, est .31

  • Revs +6% to 2.26bn,

  • Cardio +5%, Rhythm Management +2%, MedSurg +11%

  • Guidance: 3Q17 Revs 2.18-2.21bn, EPS .29-.31, FY17 Revs 8.89-8.99, EPS 1.23-1.27

1Q 17     .29 vs .28, est .30

  • Revs +10% to 2.16bn, above top end of guidance range, organic +9%

  • Rev growth in all segments, MedSurg +12% organic, Cardio +8% organic, Rhythm +8% organic, US +11% organic, EU +7% organic, AMEA +8% organic, Emering +12% organic

  • 2Q Guidance: Revs 2.185-2.215bn (+3-4%), EPS .30-.32, est .31

  • FY17 Guidance: Revs 8.8-8.9 (prior guidance 8.675-8.875), +5-6% reported growth, EPS 1.22-1.26 (est 1.24),

  • expect improved SG&A as a % of revs through the year.

  • Solid revenue growth quarter across all segments and geographic regions, stock was up slightly.