BSX

Why Boston Scientific Shares Fell 12.7% in March

What happened

Shares of Boston Scientific (NYSE: BSX) slipped 12.7% in March, according to data provided by S&P Global Market Intelligence, as investors anticipated a slowdown in its business due to the outbreak of COVID-19, the illness caused by the novel coronavirus.

Boston Scientific, a maker of devices such as stents and catheters, on Feb. 5 -- when the health crisis remained primarily in China -- predicted delayed medical procedures and supply chain disruptions would hurt business there. At that time, the company estimated the coronavirus in China could have a $10 million to $40 million negative impact on its sales in the first quarter.

Four surgeons are at work in an operating room.

Image source: Getty Images.

So what

Now that the coronavirus outbreak has expanded, reaching 900,300 cases worldwide, delayed procedures have become a problem for Boston Scientific in countries beyond China. To handle the influx of coronavirus patients, hospitals have postponed non-essential elective procedures. This results in a clear weight on Boston Scientific's revenue prospects for the quarter.

Now what

Boston Scientific provided an update on April 2, saying procedure volumes dropped "significantly" last month as COVID-19 cases climbed. As a result, the company now expects first-quarter revenue growth to be flat to slightly up on a GAAP basis year over year. Boston Scientific predicts a 2% to 3% decline in organic revenue for the period. In an effort to cut costs in case the outbreak continues, all executive officers are taking a pay cut that could last up to six months. Chief executive officer Michael Mahoney is forgoing his base salary, while the other executives are taking a 50% pay cut.

Though the immediate picture looks grim for Boston Scientific, the shares remain a strong bet for the long-term investor due to a track record of increasing annual revenue -- and the promise of newly approved products like the Exalt Model D duodenoscope. Duodenoscopes are used in procedures performed 1.5 million times globally every year to explore pancreatic and bile ducts and treat related conditions. Some investors may use weakness in Boston Scientific now to take a position in the stock and benefit from future revenue growth.

10 stocks we like better than Boston Scientific
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Boston Scientific wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of March 18, 2020

 

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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

Tags

More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.