Boston Scientific Trades Up on Strong Q1 amid Recall Issues
On May 29 2017, we issued an updated research report on leading medical devices company, Boston Scientific Corporation BSX. The stock currently carries a Zacks Rank #3 (Hold).
Boston Scientific’s shares gained 9.46% in the past three months, considerably ahead of the Zacks categorized Medical - Products Industry’s gain of 1.29%.
The company was recently entangled with several issues that reduced its share price. While adverse foreign exchange continued to pose challenges, market acted extremely bearish on the company’s recent recall of one of its prime products, Lotus range of heart devices from Europe, because of technical malfunctions.
However, a strong topline performance for first-quarter 2017 with balanced growth across all geographies and segments has helped the company rebound its share price to a considerable extent.
Notably, this improved quarterly performance was backed by a perfect execution of long-term strategic plans including portfolio expansion, globalization efforts and investments into fast-growth markets.
Boston Scientific’s inorganic means to strengthen its core businesses, plus investments in new technologies and global markets buoy optimism. In addition, we are also encouraged with the company gaining a number of approvals for its products, both in domestic and foriegn markets.
Among recent developments, worth mentioning is the company’s buyout of Switzerland-based Symetis SA, in a bid to fortify its structural heart business in Europe. This apart, NICE’s (National Institute for Health and Care Excellence) recommendation on Boston Scientific’s cardiac resynchronization therapy defibrillators (CRT-D) with EnduraLife Battery Technology for treating patients with heart failure was important.
We are also looking forward to the company’s newly implemented global restructuring plan. It has already chalked out several key activities under this program which include strengthening global infrastructure through evolving global real estate and workplaces, developing global commercial and technical competencies, enhancing manufacturing and distribution expertise in certain regions, plus continuing implementation of the plant network optimization (PNO) strategy.
The above activities are scheduled to be complete by 2018-end. Reaping benefits, the company expects the program to reduce gross annual pre-tax operating expenses by approximately $115–$150 million by end of 2020.
Boston Scientific also hopes to reinvest a portion of the program’s savings in strategic growth initiatives.
While the Lotus Valves were taken off from the European market, we have little hope for the company to resolve this issue and return the product to the market any time before fourth quarter. This may lead to a major setback for the company’s fast-growing transcatheter aortic valve replacement (TAVR) business within interventional cardiology. Strong players in the large medical device market also pose a tough challenge for Boston Scientific.
Key Picks
Few better-ranked stocks in the broader medical sector are Luminex Corporation LMNX, Inogen, Inc. INGN and Edwards Lifesciences, Inc. EW. Luminex and Inogen sport a Zacks Rank #1 (Strong Buy), while Edwards Lifesciences carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Luminex has an expected long-term adjusted earnings growth of almost 16.3%. The stock roughly added 8.9% over last three months.
Inogen has long-term expected earnings growth rate of 17.5%. The stock has a solid one-year return of around 84.6%.
Edwards Lifesciences has an expected long-term adjusted earnings growth of almost 15.2%. The stock added roughly 21.6% over last three months.
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