The Zacks Analyst Blog Highlights: Burger King Worldwide, Boston Scientific, St. Jude Medical, Medtronic and NuVasive

Zacks

For Immediate Release
 
Chicago, IL – December 30, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Burger King Worldwide, Inc. (BKW-Free Report), Boston Scientific Corporation (BSX-Free Report), St. Jude Medical Inc. (STJ-Free Report), Medtronic Inc. (MDT-Free Report) and NuVasive, Inc. (NUVA-Free Report).
 
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Here are highlights from Friday’s Analyst Blog:

Burger King Stays at Outperform
 
We maintain our Outperform recommendation on Burger King Worldwide, Inc. (BKW-Free Report), as the restaurateur is witnessing strong momentum. Its international expansion plans, rising margins, initiatives to boost sales and strong third quarter results encourage us.

Why the Reiteration?

Burger King, the world’s second largest fast food hamburger restaurant chain is well positioned to sustain growth in existing and new markets through product introductions, prototype design upgrades, and longer restaurant hours.

Moreover, the company remains committed to accelerate international expansion in high-growth potential markets mainly through franchising. We believe franchising a large chunk of its system facilitates earnings and return on equity growth owing to lower capital requirements. The company’s franchised business model allows it to generate strong free cash flow, thereby helping it to maintain a healthy balance sheet. Moreover, international expansion through franchising helps in increasing brand recognition.

Meanwhile, Burger King’s “four-pillar” strategy, which includes restaurant re-imaging, menu improvement, marketing initiatives and improving operational efficiency allows it to focus on key areas of operation and stay competitive in the saturated U.S. restaurant industry while boosting sales.

While most of the restaurant chains are grappling with margin pressure owing to cost inflation as well as excessive focus on value-driven offerings, Burger King’s performance on the margin front is worth mentioning. The company witnessed a consistent rise in margins in all the three quarters of the year thanks to its disciplined cost management.

Driven by these factors, the company posted strong third quarter results with earnings beating the Zack Consensus Estimate by 9.5% and revenues by 3.4%. Estimates for 2013 and 2014 largely moved upwards over the past 60 days, reflecting the strong results. The Zacks Consensus Estimate for 2014 increased 1.08% to 94 cents over the same period.

Also, the practice of increasing dividend affirms the company’s optimistic outlook and growth prospects.

The company presently has a Zacks Rank #2 (Buy).
 
Boston Scientific Expanding in China
 
A media report indicated that Boston Scientific Corporation (BSX-Free Report) has made plans to increase its presence in China. The decision to expand its footprints in one of the most emerging markets aims to offset the negative impact of slow medical device sales in the U.S.

Boston Scientific had entered the Chinese market in 1997. Thereafter, the company has continuously strived to consolidate its position in the emerging markets of Brazil, Russia, India and China (:BRIC) that recorded over 29% growth on a combined basis in the recently completed quarter.  

BSX' plans for expansion in the Chinese market are justified. Recent estimates show that the annual Cardiovascular Disease (CVD) events in China are expected to increase by more than 50% between 2010 and 2030. This translates into the potential for 39 million Coronary Artery Disease (CAD) events and 130 million strokes (total 169 million). It has also been observed that more than 230 million Chinese people have some form of CVD, resulting in 3 million deaths.

Foreseeing the potential, the company has been taking several initiatives to capture a significant portion of the Chinese medical device market. Boston Scientific plans to expand its 400-strong sales and marketing employee base in China by 24% in the next year. It will also customize products with focus on the Chinese market. BSX has devised a three-tier plan to compete against rivals, comprising better after-sales service, doctors’ training and continued innovation.

Accordingly, Boston Scientific plans to open new doctor-education centers across the country, adding to its newly opened multimillion-dollar innovation center in Shanghai. This will help gain faster and effective patient access as doctors are believed to have a strong hold in the Chinese market.

Recently, a Shanghai branch of the Boston Scientific Institute for Advancing Science (:IAS) was opened to train medical professionals in China and in other Asia-Pacific countries. The training exclusively will be focused in areas like interventional cardiology, cardiac rhythm, electrophysiology, endoscopy peripheral interventions, urology and women's health.

Competition in the Chinese Medical device market is likely to increase further from the current level. Boston Scientific’s competitors have also adopted business initiatives in the country. St. Jude Medical Inc. (STJ-Free Report) has unveiled its Advanced Technology Center Asia Pacific in Beijing, while Medtronic Inc. (MDT-Free Report) has opened a new regional headquarters in Shanghai, China.

Boston Scientific might face major access hurdles and bureaucratic barriers in the country going forward. However, the company expects its positive initiatives will increase sales by 30% in China over the next five years.

Besides these initiatives, the company is also planning to tread the inorganic route to further expand its operation and offer lower-priced devices to its customers.

Currently, Boston Scientific Corporation carries a Zacks Rank #3 (Hold). A better-ranked stock in the same sector is NuVasive, Inc. (NUVA-Free Report), carrying a Zacks Rank #1 (Strong Buy).
 
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