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We recently reinstated our Neutral recommendation on Boston Scientific Corporation (BSX - Analyst Report), a leading medical devices company. After several quarters of weak performance, we are encouraged with the company’s efforts at revival, as reflected in its improved fourth-quarter 2012 result. While challenges still remain in the core stent and defibrillators businesses, we hold a favorable view regarding the recent update on the company’s growth objective with significant new additions. The stock currently carries a Zacks Rank #3 (Hold).

Why at Neutral?

Boston Scientific posted an improved fourth quarter with adjusted EPS of 11 cents, up 37.5% year over year and in line with the Zacks Consensus Estimate. Although revenues declined 1% year over year at constant exchange rate (or CER) to $1.821 billion, it exceeded the Zacks Consensus Estimate of $1.760 billion. Further, both top- and bottom-line results met the company’s guided range.

Although Boston Scientific’s result remains challenged by headwinds in its core segments, we are encouraged by the company’s various measures to combat this challenging economic scenario. In an analyst meet on Feb 12, Boston Scientific came up with significant new additions and alterations in its growth objectives.

According to the company, the earlier growth objectives, provided in 2010 and considered as “too aggressive”, required alterations since the challenging economic scenario led to a notable change in the end market. Accordingly, BSX mentioned that the IC and CRM markets might stabilize over the next 3 years, leading to a slight improvement in sales (low single-digit growth). Management also provided an update on its view for the medium term (2014-2015) and long term (2016-2017).

We believe that a fresh take on growth objectives after a period of pressurized core business by new management will lead to a turnaround.. However, as of now, we prefer to remain on the sidelines until further visibility is obtained in this regard.

Other Stocks to Consider

While we prefer to remain on the sidelines on Boston Scientific, other medical devices stocks worth a look are Medical Action Industries Inc. Given Imaging and Cyberonics Inc. (CYBX - Analyst Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

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