Revenues in the third quarter decreased 5% year over year to $1.92 billion driven by declines in both domestic (6% to $1.10 billion) and international markets (5% to $0.81 billion). Revenues according to the Zacks Consensus Estimate were $1.91 billion.

Defibrillators ship hold and product removal actions slowed the revenue growth rate by approximately 140 basis points or $28 million, as compared with the company's estimate of $44 million due to proper execution of the recovery plan.

For the fourth quarter of 2010, Boston Scientific expects net sales and adjusted EPS in the range of $1.93–$2.00 billion and 15–18 cents, respectively. Given the impact of the first three quarters of 2010, the company estimates ICD ship hold to have a negative impact of approximately $190 million for the full year 2010, compared with the previous estimate of $225 million.

Moreover, for fiscal 2010, Boston Scientific expects sales and adjusted EPS of $7.7-$7.8 billion and 63-66 cents, respectively.

Agreement of Analysts

Revisions in estimates have been insignificant over the last 30 days. Out of 25 analysts covering the stock, estimates have been lowered by 2 for both the fourth quarter and fiscal 2010. No upward revisions in estimates have taken place for these periods.

Pricing pressures especially in the markets of CRM and DES, and economic uncertainty which impacts elective surgeries have been the primary challenges in the recent past. Consequently, we expect Boston Scientific to update the current scenario in both the US and international market.

In order to diversify its revenue stream, Boston Scientific has been restructuring its product portfolio, which includes divestment of its Neurovascular business and significant acquisitions. We expect more visibility regarding these initiatives during the quarter.

In January 2011, Boston Scientificcompleted enrollment in the EVOLVE trial, which is meant to evaluate its fourth generation Synergy coronary stent. The study enrolled 291 patients across 29 sites in Europe, Australia and New Zealand. With the completion of patient enrolment, the company might reveal the potential approval date of Synergy.

Magnitude of Estimate Revisions

For the fourth quarter, there has not been any revision in estimates while estimates for fiscal 2010 have gone up by a penny over the last 90 days. For fiscal 2011 as well, estimates have increased by a penny to 42 cents per share over the past 3 months.

Surprise

Going by past trends, we expect Boston Scientific to exceed estimates. The company exceeded expectations in the previous four quarters consecutively and has a positive four-quarter average of 66.59%. This means that on an average, Boston Scientific has topped the Zacks Consensus Estimate by 66.59% over the last four quarters.

Our Recommendation

The acquisition of Asthmatx and Atritech will enable the company to diversify its revenue stream away from CRM and Cardiovascular areas. However, we continue to remain concerned with its core business where Boston is witnessing significant pricing pressure and loss of market share. Moreover, economic uncertainty is impacting procedure volume.

We currently have a ‘Neutral' recommendation on the stock.