Boston Scientific to Cut 1,000 Jobs in Restructuring
Boston Scientific Corp. (BSX), the second- biggest maker of heart devices, plans to cut as many as 1,000 jobs in an expansion of its restructuring program that will save an additional $100 million to $115 million a year.
Boston Scientific said it will combine attrition and headcount reductions in the new phase of the cost-cutting program, first introduced in 2011. The targeted jobs equal about 4 percent of the Natick, Massachusetts-based company workforce. Boston Scientific also posted fourth-quarter sales of $1.82 billion, beating analysts’ estimates.
The company is performing better than expected in markets that have suffered in recent years for heart-rhythm devices and artery stents, said analyst Michael Weinstein at JPMorgan Chase & Co. in New York. The company forecast 2013 sales of $7.05 billion to $7.35 billion, compared with $7.25 billion last year.
“Drug-eluting stent sales bounced back after a difficult first nine months of 2012 and Boston’s non-drug-eluting stent/cardiac rhythm management businesses turned in their best growth quarter in more than four years,” Weinstein wrote today in a note to investors.
Fourth-quarter earnings, excluding one-time items, of 11 cents a share met the average estimate of 21 analysts compiled by Bloomberg. The device maker forecast adjusted earnings of 37 cents to 43 cents a share for 2013, according to a statement.
Results are expected to improve as 2013 progresses, with the first quarter carrying the additional burden of two fewer selling days than a year earlier, said Chief Executive Officer Michael Mahoney. Subsequent easier comparisons, the introduction of new products and better execution will drive profit higher the rest of the year, he said in a telephone interview.
The company also announced today a $1 billion stock repurchase program, after buying back 18 million shares under a 2011 plan. It has purchased 12 percent of its own outstanding shares in the past 18 months.
“We believe the stock, even with the recent run-up, is undervalued,” Mahoney said, acknowledging the company will reconsider the share buyback program as the stock rises. “We still think it’s a good investment for shareholders.”
Boston Scientific rose 3.5 percent to $7.10 at 4 p.m. New York time, its the highest closing value since July 29, 2011. The shares gained 20 percent in the past 12 months.
Boston Scientific plans to take a pretax charge of $140 million to $160 million related to implementing the next step of the restructuring initiative. The entire program is expected to reduce pretax operating expenses by $340 million to $375 million a year by the end of 2013.
The savings will be used to pay the 2.3 percent medical device excise tax, or $75 million a year for Boston Scientific, that was implemented for President Barack Obama’s overhaul of the health-care system. The company also plans to redirect the savings toward investments in faster growing regions and technologies, while ensuring the appropriate staff levels in established areas, Mahoney said.
The company posted strong earnings and solid guidance, and is reinvesting in growth initiatives, said Derrick Sung, an analyst with Bernstein Research in New York, in a note to investors. It must now focus on getting its new products to the market and driving growth, something Boston Scientific has struggled with in the past, he wrote.
“We clearly need to tighten down and improve our research and development productivity,” Mahoney said. “We have a number of near-term pipeline products we’re confident we will deliver on. We are pleased with the momentum but definitely not satisfied.”
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