Boston Scientific Swings to a Profit

Boston Scientific(BSX - Cramer's Take - Stockpickr) used tight fiscal controls and the sale of businesses to beat first-quarter profit estimates. The company acheived the result despite declining revenue and a continued drop in cardiac-stent sales in the U.S.

The Natick, Massachusetts-based medical device maker, which has sold five businesses -- resulting in a $250 million pre-tax first-quarter gain -- and slashed 8% of its workforce in an effort to realign expenses with revenue, turned a profit after a charge-heavy fourth-quarter loss.

On a GAAP basis, the company earned $322 million, or 21 cents a share, vs. $120 million, or 8 cents a share in the year-ago quarter when the company incurred a $180 million (9 cents a share) charge related to its Guidant acquisition.

With its last quarterly earnings, Boston Scientific had forecast adjusted first-quarter earnings of 15 cents to 20 cents a share, on net sales of between $1.96 billion and $2.08 billion.

On Tuesday, the company reported adjusted net income of $357 million, or 24 cents a share, compared with $262 million, or 17 cents a share in the year-ago quarter.

The recent quarter included $43 million, or 3 cents a share, of favorable discrete income tax items, and $8 million, or a penny a share, associated with divested businesses.

Revenue fell to $2.04 billion from $2.08 billion in the year-ago quarter, within the company's guidance but slightly ahead of Wall Street estimates.

Analysts surveyed by Thomson Financial were looking for $169 million, or 11 cents a share, on revenue of $2.02 billion.

Worldwide sales of coronary stent systems (tiny mesh tubes used to prop open clogged arteries) were $490 million, down from $527 million in the year-ago quarter. As in prior quarters, the weaker stent sales came primarily in the U.S., where safety concerns have hurt the market for the devices. U.S. sales fell 23% to $244 million from $317 million the year prior, while international sales increased 17% to $246 million.

Worldwide sales of drug-eluting coronary stent systems, which are coated with antibiotics to keep the arteries from renarrowing, fell to $428 million from $468 million. U.S. sales were again the culprit, falling 26% to $218 million, while international sales increased 20% $210 million.

In addition to already-declining U.S. stent sales, Boston Scientific and Johnson & Johnson(JNJ - Cramer's Take - Stockpickr) are now facing a new competitor, Medtronic(MDT - Cramer's Take - Stockpickr) which received approval for its endeavor stent.

Sales of Boston Scientific's cardiac rhythm management (CRM products) rose to $565 million from $539 million the year prior. Within the CRM unit, sales of implantable cardioverter defribrillators (ICD), tiny generators that send a small jolt of electricity to the heart in the case of irregular heartbeat or heart failure, increased 3% year over year to $411 million. CRM and ICD sales increased both in the U.S. and internationally.

"We continued to make good progress during the quarter, particularly in our efforts to bring expenses in line with revenues," said Boston Scientific CEO Jim Tobin, in a Tuesday release. "Our earnings benefited from our ongoing expense management and were also helped by favorable tax items.

Looking ahead, Boston Scientific expects an adjusted second-quarter profit of between 14 cents a share and 19 cents a share, on sales of $1.950 billion and $2.075 billion.

Analysts surveyed by Thomson Financial had pegged 12 cents a share on sales of $2.02 billion.

Shares were up 2 cents, or 0.15%, at $13.05 in Tuesday trading.