Boston Scientific Kept at Neutral - Analyst Blog

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We recently reinstated our Neutral recommendation on Boston Scientific Corporation ( BSX ), a leading medical devices company. Despite challenging economic conditions, competitive environment, pressure on core segments and a larger-than-expected currency headwind, Boston Scientific managed to post healthy third-quarter 2013 results with a beat on revenues and in-line earnings. 

While challenges still remain in the core stent and defibrillators businesses, we are optimistic about the recent update on the company's growth objective that conveys significant new additions . The stock currently carries a Zacks Rank #3 (Hold).

Why Neutral?

Boston Scientific's third quarter adjusted EPS of 17 cents beat the year-ago adjusted EPS by a penny and also exceeded the company's guided range. However, results remained on par with the Zacks Consensus Estimate.Revenues went up 4% at CER to $1.735 billion, ahead of the Zacks Consensus Estimate of $1.729 billion, remaining within the guided range.

However, for quite a long time, the US defibrillator and stent markets have remained as major overhangs. Despite several initiatives undertaken by the company to revive its top line, we remain cautious as its core segments -­ implantable cardioverter defibrillator and DES (contributing 35% of sales) are still taking a toll on the numbers. This is reflected in the company's updated revenues and EPS guidance for the fiscal wherein it has slashed the upper end of the earlier provided range by a significant extent.

Meanwhile, Boston Scientific is resorting to all available means in order to return to growth. To revive its top line, the company is focusing on strategic initiatives to drive growth and profitability. These include the recently announced restructuring initiatives, strengthening of its portfolio, targeting suitable acquisitions in areas of unmet medical needs, and focusing on emerging markets. The recently declared higher management churn is also expected to synchronize well with the company's growth strategies.

The company has a strong pipeline of products under development, the launch of which should boost the top line. We are encouraged by the focus on emerging markets, especially India and China. Boston Scientific plans to invest approximately $150 million in China over the next 5 years to build a local manufacturing operation. It expects the Interventional Cardiology (IC) and Cardiac Rhythm Management (CRM) markets to stabilize over the next 3 years as well, leading to a slight improvement in sales (low single-digit growth).

Other Stocks to Consider

Some better-ranked medical devices stocks that are worth a look are Cepheid ( CPHD ), CryoLife Inc. ( CRY ) and AngioDynamics Inc. ( ANGO ). Both Cepheid and CryoLife carry a Zacks Rank #1 (Strong Buy), while AngioDynamics has a Zacks Rank #2 (Buy).



ANGIODYNAMICS (ANGO): Free Stock Analysis Report

BOSTON SCIENTIF (BSX): Free Stock Analysis Report


CEPHEID INC (CPHD): Free Stock Analysis Report

CRYOLIFE INC (CRY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Business , Stocks

Referenced Stocks: ANGO , BSX , CPHD , CRM , IC

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