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Boston Scientific (BSX) Hurt by Price and Volume Issues

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Boston Scientific Corporation’s (BSX - Free Report) elective procedure deferrals amid the pandemic are weighing on the stock. Further, unfavorable currency movement has been a major dampener. The stock currently carries a Zacks Rank #4 (Sell).

During the fourth quarter of 2021, Boston Scientific’s selling, general and administrative expenses rose 12.3%, whereas research and development expenses rose 11.9%. These escalating expenses are building significant pressure on the company’s bottom line. Although the company reported margin expansion on a year-over-year basis, gross margin continued to be impacted by the current macro-environment headwinds.

These headwinds include the cost of running plants with COVID-specific measures, increased freight costs and price pressure and higher direct labor wages. Further, the ongoing COVID-19 pandemic continued to impact procedure volumes in the brain franchise, raising apprehension.

Declining worldwide pacemaker sales over the recent past continued to weigh on Boston Scientific's CRM results. However, pacemaker sales should gradually improve with new product launches (including the launch of RESONATE platform) and easier comps.

Unfavorable currency movement and product recall were major dampeners during the quarter. Strong competitors in the large medical device market also pose a tough challenge for Boston Scientific.

On a positive note, Boston Scientific ended 2021 on a bullish note, with fourth-quarter adjusted earnings and revenues surpassing the Zacks Consensus Estimate. The company registered a year-over-year improvement in organic sales, indicating a strong rebound in the legacy business from the pandemic mayhem.

Organic revenues at each of its core business segments and geographies were up in the reported quarter. Specifically, the company delivered solid growth in the fourth quarter across PI, EP and Endo, fueled by new and ongoing product launches like TheraSphere, POLARx and AXIOS.

During the quarter, the WATCHMAN franchise delivered impressive sales performance, ahead of expectations. The company also continued to differentiate its drug-eluting stent portfolio with the launches of Synergy 48-millimeter and MEGATRON globally.

The company also reported margin expansion on a year-over-year basis. The initial 2022 guidance with strong organic growth expectations looks promising. New acquisitions like Preventice, Farapulse and Lumenis Surgical, which closed in March, August and September of 2021, respectively contributed to the inorganic growth of Boston Scientific in the reported quarter.

Over the past year, Boston Scientific has outperformed the industry it belongs to. The stock rose 7% against the industry’s 20% decline.

Stocks to Consider

A few better-ranked stocks in the broader medical space are Henry Schein, Inc. (HSIC - Free Report) , McKesson Corporation (MCK - Free Report) andAmerisourceBergen Corporation (ABC - Free Report) .

Henry Schein has an estimated long-term growth rate of 11.8%. Henry Schein’s earnings surpassed estimates in the trailing four quarters, the average surprise being 25.5%. It carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Henry Schein has outperformed the industry over the past year. HSIC has gained 34.2% compared with the industry’s 12.2% rise over the past year.

McKesson has a long-term earnings growth rate of 11.8%. McKesson’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 20.6%, on average. It carries a Zacks Rank #2.

McKesson has outperformed the industry over the past year. MCK has gained 27.7% against the 12.7% industry decline in the said period.

AmerisourceBergen has a long-term earnings growth rate of 8.2%. In the trailing four quarters, AmerisourceBergen’s earnings surpassed estimates thrice and missed once, delivering an average surprise of 2.3%. The stock currently carries a Zacks Rank #2.

AmerisourceBergen has outperformed its industry in the past year, gaining 37% compared with the industry’s 12.2% rise.