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Boston Scientific Corporation BSX is gaining from strategic acquisitions. The recently concluded buyout of Lumenis LTD. buoys optimism. Strength in the structural heart business looks encouraging as well. A stable solvency position is an added positive. However, declining pacemaker sales and adverse currency movements do not bode well.
Over the past year, the Zacks Rank #3 (Hold) stock has gained 13.3% against 3.2% growth of the industry. The S&P 500 rose 32.3% in the said time frame.
The renowned manufacturer of medical devices and products has a market capitalization of $60.94 billion. Its earnings for the second quarter of 2021 surpassed the Zacks Consensus Estimate by 8.1%.
The company’s long-term projected growth of 9.3% compares with the industry’s growth projection of 16.5% and the S&P 500’s expectation of 11.4% growth. The company’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 13.41%.
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Let’s delve deeper.
Factors At Play
Value-Adding Acquisitions: We are upbeat about Boston Scientific’s recent acquisitions, which have introduced a slew of new products (many of which are under development) with enormous potential. With its differentiated laser technology, the recently completed acquisition of Israel-based Lumenis broadens the company’s Urology portfolio. This apart, the conclusion of the acquisition of Preventice Solutions contributed 240 basis points to the company’s revenue growth in the second quarter. Within Electrophysiology, the impending Farapulse acquisition is expected to enable the company to strengthen its position in the emerging space of pulsed field ablation. Other strategic buyouts by Boston Scientific include BTG, Millipede (within Structural Heart) Claret Medical, VENITI and Augmenix.
Structural Heart, a Long-Term Growth Component: Boston Scientific’s structural heart programs are fast building momentum, banking on strong performance of the WATCHMAN left atrial appendage closure device and ACURATE TAVR valve. In this regard, WATCHMAN recently received reimbursement in Japan. The next-generation WATCHMAN FLX is solidly capturing the European market. In the second quarter, Boston Scientific’s Interventional Cardiology organic sales grew 55.2% on double-digit growth in Structural Heart Valves, WATCHMAN and Complex PCI and Imaging franchises. In TAVR, the ACURATE neo2 launch continued to do well in Europe, supported in part by the real-world data presented at Euro PCR.
Stable Solvency Structure: Boston Scientific exited the second quarter of 2021 with cash and cash equivalents of $2.68 billion. The quarter’s total debt of $9.11 billion was much higher than the corresponding cash and cash equivalent level. However, the company has short-term-payable debt of $262 million on its balance sheet, which is far lower than the current amount of cash in hand. This is good news in terms of the company’s solvency position, particularly during the time of global pandemic when it is majorly facing manufacturing and supply halt globally.
Pacemaker Sales Still Declining: Declining worldwide pacemaker sales over the recent past continued to weigh on Boston Scientific's CRM results. However, pacemaker sales should gradually improve with new product launches (including the launch of RESONATE platform) and easier comps.
Exposure to Currency Movement: Unfavorable currency movements have been a major dampener for Boston Scientific over the last few quarters, as in the case of other notable MedTech players. With 47% of its sales derived from the international market, the company remains highly exposed to currency fluctuations.
Competitive Landscape: Boston Scientific participates in several markets, including Cardiovascular, CRM, Endosurgery and Neuromodulation. The company faces significant competition in these markets from large, well-capitalized companies such as Medtronic plc MDT, apart from several other smaller companies.
Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 1.9% north to $1.61.
The Zacks Consensus Estimate for third-quarter 2021 revenues is pegged at $2.99 billion, suggesting a 12.46% rise from the year-ago reported number.
Zacks Rank and Key Picks
Two better-ranked stocks from the Medical-Products industry include National Vision Holdings, Inc. EYE and BellRing Brands, Inc. BRBR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
National Vision has a long-term earnings growth rate of 23%.
BellRing Brands has a long-term earnings growth rate of 29.1%.
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