On Nov 26, 2015, we issued an updated research report on leading medical devices company Boston Scientific Corporation BSX. Despite challenging economic conditions, a competitive environment and severe currency headwinds, Boston Scientific managed to post a better-than-expected third-quarter 2015, with both earnings and revenues exceeding the Zacks Consensus Estimate. We are impressed that the company has managed to post constant currency growth across most of its segments. The stock currently carries a Zacks Rank #3 (Hold).
Boston Scientific continues to strengthen its core businesses and invest in new technologies and global markets, which accounted for the sales upside across most of its businesses and regions in the reported quarter.However, despite several recent strategic initiatives, continued sluggish performances in the company’s core pacing and defibrillators add to our worries.
An important aspect of the company’s growth strategy is to continue pursuing development opportunities outside the U.S. by expanding global presence, inclusive of the emerging markets. In the third quarter of 2015, business from the emerging markets registered a robust 13% organic growth rate, ahead of the company’s target of reaching 15% of sales in 2017 from 8% in 2013.
Boston Scientific hopes to sustain its strong overall international performance taking into consideration several key new product launches that are in the early stages of their rollout. The company is also optimistic about its core cardiology segment which is gradually stabilizing with growth witnessed in the BRIC nations. The cardiology capacity in China is expected to double by 2017. In India, business is projected to grow more than 15% annually.
We also look forward to Boston Scientific’s buyout of the American Medical Systems (AMS) urology portfolio. Urology represents attractive global market potential of $4 billion with large unmet patient needs and considerable international expansion opportunities. We believe the acquisition has significant potential to capitalize on this opportunity.
Furthermore, Boston Scientific has a strong pipeline of products under development, the launch of which should drive the top line, going ahead. We are optimistic about the company’s gradually improving performance in Interventional Cardiology, led by an innovative portfolio and robust execution by global commercial teams.
Key Picks in the Sector
Better-ranked medical product stocks that warrant a look include GW Pharmaceuticals plc GWPH, Hill-Rom Holdings, Inc. HRC and ICU Medical, Inc. ICUI. All the three stocks sport a Zacks Rank #1 (Strong Buy).
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