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Boston Scientific (BSX) Gains from New Buyouts, FX Issue Ails

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Boston Scientific Corporation (BSX - Free Report) has been gaining from its slew of strategic acquisitions and product launches. However, mounting operating expenses and foreign exchange headwinds raise apprehension. The stock currently carries a Zacks Rank #3 (Hold).

Over the past year, Boston Scientific has outperformed the industry it belongs to. The stock has lost 3.3% against the industry’s 22.9% fall.

Boston Scientific ended the first quarter of 2022 on a bullish note, with adjusted earnings and revenues surpassing the Zacks Consensus Estimate. Total operational sales grew 13% versus the prior year, while organic sales grew 10% above the high end of the company guidance. The company’s performance was strong across all regions where most of its businesses grew at or faster than their respective markets.

First-quarter performance in the United States was particularly strong in WATCHMAN, PI, cardiology and endoscopy. In Europe, Middle East, Africa, the company grew 12% year over year on operational basis, with particular strength in structural heart, including TAVR, WATCHMAN and other interventional cardiology therapies, as well as electrophysiology. In Asia-Pac, Boston Scientific grew 14% operationally, with new product launches fueling the growth in the region, notably, POLARx and Ranger in Japan, and WaveWriter Alpha in Australia.

Despite continued macroeconomic headwinds and resulting supply chain pressure, first-quarter adjusted operating margin was 25.8%, higher than anticipated due to the overachievement of sales and lower spending. The company has also raised it 2022 operational growth expectation to 9%-11% and organic growth expectation to 6.5%-8.5%.

In terms of acquisitions, in Feb 2022, Boston Scientific completed the purchase of Baylis Medical Company for an upfront payment of $1.75 billion. The acquisition is expected to expand the company’s electrophysiology and structural heart product offerings with the addition of the radiofrequency NRG and VersaCross Transseptal Platforms, as well as a range of guidewires, sheaths and dilators.

Further, the company closed the acquisition of Devoro during the fourth quarter of 2021 and is currently looking forward to launching its arterial and venous offerings in the second half of 2022.

On the flip side, during the first quarter, Boston Scientific’s total revenues reflected a $74-million headwind from foreign exchange, higher than the company’s expectations, driven by the strengthened U.S. dollar. Further, the 2021 divestiture of the BTG Specialty Pharmaceuticals business acquisition partially offset the company’s inorganic growth.

In the quarter, the company reported a 6.8% rise in the cost of products sold. Selling, general and administrative expenses rose 4%, while research and development expenses rose 15.6% year over year. Although the company reported margin expansion on a year-over-year basis, adjusted gross margin continued to be impacted by the current macro-environment headwinds and resulting pressures on the global supply chain.

Declining worldwide pacemaker sales over the recent past continued to weigh on Boston Scientific's CRM results. Unfavorable currency movement was another major dampener during the quarter. Strong competitors in the large medical device market pose a tough challenge for Boston Scientific.

Stocks to Consider

A few better-ranked stocks in the broader medical space are UnitedHealth Group Incorporated (UNH - Free Report) , Medpace Holdings, Inc. (MEDP - Free Report) and Alkermes plc (ALKS - Free Report) .

UnitedHealth, having a Zacks Rank #2 (Buy), reported first-quarter 2022 earnings per share (EPS) of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 14.2%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.

Medpace reported first-quarter 2022 adjusted EPS of $1.69, which surpassed the Zacks Consensus Estimate by 34.1%. Revenues of $330.9 million outpaced the Zacks Consensus Estimate by 1.1%. It currently has a Zacks Rank #2.

Medpace has a historical growth rate of 27.3%. MEDP’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%.

Alkermes reported first-quarter 2022 adjusted EPS of 12 cents, which surpassed the Zacks Consensus Estimate of a penny. Revenues of $278.6 million outpaced the Zacks Consensus Estimate by 6.2%. It currently sports a Zacks Rank #1.

Alkermes has an estimated long-term growth rate of 25.1%. ALKS’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%.