Boston Scientific (BSX) Gains From Global Expansion, FX Woe Ails
Boston Scientific BSX is gaining traction in emerging markets. Innovative prowess, FDA approvals and accretive acquisitions bode well for long-term growth. However, the unfavorable currency movement and macroeconomic concerns are major dampeners. The stock carries a Zacks Rank #3 (Hold)
Boston Scientific successfully continues with its expansion of operations across different geographies outside the United States. In 2022, 40% of the company’s consolidated revenues came from international regions.
Within its international regions, BSX is putting additional efforts to expand its foothold in emerging markets (which are defined as all countries except the United States, Western and Central Europe, Japan, Australia, New Zealand and Canada) that hold strong growth potential based on their economic conditions, healthcare sectors and global capabilities.
In the EMEA too, Boston Scientific is successfully expanding its base banking on its diverse portfolio, new launches and commercial execution with healthy underlying market demand. Within the Asia Pacific (“APAC”), Boston Scientific is particularly registering strong growth in Japan and China. Within Japan, the company is benefitting from new product launches like AGENT DCB, Rezum, POLARx FIT and WATCHMAN FLX. In China, BSX is gaining from the Imaging and Complex PCI portfolio.
Additionally, following the pandemic-led mayhem, Boston Scientific is consistently registering fast recovery within its MedSurg segment. The Endoscopy business within MedSurg is gaining from strong worldwide demand for its broad range of gastrointestinal (GI) and pulmonary treatment options. Particularly, the company is gaining market share with its biliary franchise led by the AXIOS Stent and Delivery System and hemostasis, single-use imaging and metal stent franchises.
In the third quarter of 2023, BSX reported strong organic growth contributions from single-use imaging and AXIOS technologies. Endoscopy demonstrated notable strength in the United States, Latin America and APAC, with new product momentum and healthy procedure demand during the third quarter. The company recently received U.S. marketing authorization for an expanded indication of the AXIOS stent to include gallbladder drainage, increasing access to more patients with this platform.
Over the past year, shares of Boston Scientific have increased 20.6% against the industry’s 3.2% decline.
Boston Scientific Corporation Price
Boston Scientific Corporation price | Boston Scientific Corporation Quote
Meanwhile, the industry-wide trend of challenging macroeconomic conditions in the form of inflation, disruptions in economic activity, global supply chains and labor markets, volatile financial market dynamics and significant volatility in price and availability of goods and services is putting pressure on BSX’s profitability. Further, international conflicts, including the Russia-Ukraine war and tension between China and Taiwan, have increased cybersecurity risks globally. With sustained macroeconomic pressure, the company may struggle to keep in check its cost of revenues and operating expenses.
In the third quarter of 2023, the company reported a 12.5% rise in the cost of products sold and a 9.7% rise in SG&A expenses. For 2023, 2024 and 2025, our model projects the cost of products sold to grow by 7.2%, 10.1% and 7.4%, respectively, over the prior year.
Further, with Boston Scientific recording 40% of its sales from the international market, it remains highly exposed to currency fluctuations. Unfavorable currency movements have been a major dampener over the last few quarters, as in the case of other important MedTech players too. In 2023, the company expects an approximate 100-basis point headwind from foreign exchange on revenues.
The presence of a large number of players has made the medical device market highly competitive. The company participates in several markets, including Cardiovascular, CRM, Endosurgery and Neuromodulation, where it faces competition from large, well-capitalized companies such as Johnson & Johnson, Abbott, Medtronic, Stryker, Smith & Nephew and Edwards Lifesciences, apart from several other smaller companies.
Key Picks
Some better-ranked stocks in the broader medical space are Haemonetics HAE, DexCom DXCM and Insulet PODD. Haemonetics and DexCom each presently carry a Zacks Rank #2 (Buy), and Insulet sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Haemonetics’ stock has decreased 0.5% in the past year. Earnings estimates for Haemonetics have increased from $3.82 to $3.89 in 2023 and $4.07 to $4.15 in 2024 in the past 30 days.
HAE’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 16.1%. In the last reported quarter, it posted an earnings surprise of 5.3%.
Estimates for DexCom’s 2023 earnings per share have increased from $1.39 to $1.43 in the past 30 days. Shares of the company have increased 0.1% in the past year compared with the industry’s decline of 4.7%.
DXCM’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 36.4%. In the last reported quarter, it delivered an average earnings surprise of 47.1%.
Estimates for Insulet’s 2023 earnings per share have increased from $1.61 to $1.91 in the past 30 days. Shares of the company have dropped 36.5% in the past year compared with the industry’s decline of 3.3%.
PODD’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 105.1%. In the last reported quarter, it delivered an average earnings surprise of 77.4%.
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