On Dec 28, 2015, we issued an updated research report on Massachusetts-based medical device major Boston Scientific Corporation BSX.The companymanufactures medical devices and products used in various interventional medical specialties worldwide.
Interestingly, during the third quarter of 2015, Boston Scientific delivered substantial growth in the emerging markets despite the challenging currency situation faced in the international markets. Evidently, business from the emerging markets registered a robust 13% organic growth rate in the third quarter, ahead of the company’s target of reaching 15% of sales in 2017 from 8% in 2013.
The company is also optimistic about its core cardiology segment that is gradually stabilizing on the back of growth in the BRIC nations. Notably, the cardiology capacity in China is expected to double by 2017. In India, this business is projected to grow more than 15% annually.
Moreover, Boston Scientific has laid out its restructuring plan, which aims at addressing financial pressures in a changing global marketplace, strengthening operational effectiveness and efficiency, and supporting new growth investments. Consequently, the company expects this restructuring plan to reduce gross annual pre-tax operating expenses by $175−$225 million and result in total pre-tax charges of approximately $250–$300 million, by the end of 2015.
Further, the company has been on an acquisition spree of late, adding several products to its already diverse portfolio. In Nov 2015, Boston Scientific agreed to purchase the interventional radiology portfolio of Texas-based CeloNova Biosciences. The addition of the CE-marked CeloNova’s TANDEM Microsphere in its peripheral intervention product portfolio will allow Boston Scientific to fetch higher product revenues from the emerging nations.
Earlier in Aug 2015, Boston Scientific completed the acquisition of the American Medical Systems urology portfolio, including the Men's Health and Prostate Health businesses of Endo International. On an adjusted basis, the transaction is expected to be breakeven to adjusted earnings per share in 2015, accretive by at least 3 cents in 2016, approximately 7 cents in 2017 and increasingly accretive thereafter.
We remind investors that Boston Scientific delivered better-than-expected results and managed to post constant currency growth across most of its segments in third-quarter 2015.
However, despite several recent strategic initiatives, continued sluggish performances in the company’s core pacing and defibrillators continue to pose risk for this stock. Moreover, fluctuating currency trends expected to linger, the company currently expects currency headwind to the tune of approximately $80–$90 million or 410–460 basis points relative to the year-ago quarter. Additonally, a tough competitive environment and challenging economic conditions hover on the stock’s prospects.
Currently, Boston Scientific carries a Zacks Rank #3 (Hold).
Key Picks in the Sector
Some better-ranked medical products stocks are Abaxis, Inc. ABAX, INSYS Therapeutics, Inc. INSY and Nxstage Medical, Inc. NXTM. All the three stocks sport a Zacks Rank #1 (Strong Buy).
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