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Here's Why You Should Retain Boston Scientific (BSX) for Now
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Boston Scientific Corporation (BSX - Free Report) has been gaining from strong performance across all geographies. The company exited the first quarter of 2022 with better-than-expected results. Its noteworthy acquisitions will likely boost the top line in the long term. However, foreign exchange headwinds and stiff competition raise apprehension over the company.
In the past year, the Zacks Rank #3 (Hold) stock has declined 11.5% compared with a 27.5% fall of the industry and a 9.4% drop in the S&P 500.
The renowned manufacturer of medical devices and products has a market capitalization of $54.28 billion. Its earnings for the first quarter of 2022 topped the Zacks Consensus Estimate by 2.6%.
In the past five years, the company’s earnings grew 8.1%, compared to the industry’s 8.9% growth and the S&P 500’s 13.4% increase. The company’s long-term projected growth of 10.8% compares with the industry’s growth projection of 15.3% and the S&P 500’s expectation of 10.8% growth.
Image Source: Zacks Investment Research
Let’s delve deeper.
Factors At Play
Q1 Upsides: Boston Scientific’s first-quarter adjusted earnings and revenues surpassed the Zacks Consensus Estimate. Total operational sales rose 13% from the prior-year quarter’s levels. Organic sales increased 10% from the high end of the company guidance. The company’s performance was strong across all regions, where all of its businesses rose at or faster than their respective markets. Despite continued macroeconomic headwinds and resulting supply chain pressure, the first-quarter adjusted operating margin was 25.8%, higher than anticipated. The upside can be attributed to the overachievement of sales and lower spending.
The company also raised its 2022 operational growth expectation to 9-11% and organic growth expectation to 6.5-8.5%.
Impressive Value-Adding Acquisitions: We are encouraged by Boston Scientific’s recent acquisitions that have added numerous products with immense potential. In Feb 2022, the company completed the purchase of Baylis Medical Company for an upfront payment of $1.75 billion. This acquisition is expected to expand the company’s electrophysiology and structural heart product offerings. The company also closed the acquisition of Devoro in the fourth quarter and is currently looking forward to launching its arterial and venous offerings in the second half of 2022.
The acquisition of Israel-based Lumenis expands the company’s urology portfolio with the addition of differentiated laser technology. Meanwhile, the acquisition of Preventice Solutions establishes a strong position for Boston Scientific in the field of cardiac diagnostics.
Electrophysiology Business Grows: During the first quarter, Boston Scientific’s electrophysiology sales were up 11% organically year over year. The company exhibited robust international strength driven by its advanced portfolio and the continued success of Farapulse. The acquisition of Farapulse, a leader in pulsed-field ablation, expanded the company’s electrophysiology portfolio to include the FARAPULSE Pulsed Field Ablation System.
Downsides
Mounting Expenses: In the first quarter, Boston Scientific’s selling, general and administrative expenses rose 4%, while research and development expenses rose 15.6% year over year. These escalating operating expenses are weighing on the company’s bottom line.
Exposure to Currency Movement: With Boston Scientific recording 47% of its sales from the international market, it remains highly exposed to currency fluctuations. In the first quarter, the company’s total revenues reflected a $74 million headwind from foreign exchange, driven by the strengthened U.S. dollar.
Competitive Landscape: The presence of a large number of players has made the medical devices market highly competitive. Boston Scientific participates in several markets, including Cardiovascular, CRM, Endosurgery and Neuromodulation, where it faces competition from large, well-capitalized companies and several other smaller companies.
Estimate Trend
In the past 90 days, the Zacks Consensus Estimate for Boston Scientific’s 2022 earnings has moved 0.6% down to $1.76.
The Zacks Consensus Estimate for 2022 revenues is pegged at $12.85 billion, suggesting an 8.1% rise from the 2021 reported number.
Key Picks
A few better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Medpace Holdings, Inc. (MEDP - Free Report) and UnitedHealth Group Incorporated (UNH - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 1.1%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.6%, on average. It currently flaunts a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 5.1% against the industry’s 65.3% fall.
Medpace has a historical growth rate of 27.3%. Medpace’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%. It currently has a Zacks Rank #2.
Medpace has outperformed its industry in the past year. MEDP has declined 15.9% compared with the industry’s 65.3% fall.
UnitedHealth has an estimated long-term growth rate of 14.8%. UnitedHealth’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%. It currently carries a Zacks Rank #2.
UnitedHealth has outperformed the industry over the past year. UNH has gained 21.9% compared with 19% industry growth in the said period.
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Here's Why You Should Retain Boston Scientific (BSX) for Now
Boston Scientific Corporation (BSX - Free Report) has been gaining from strong performance across all geographies. The company exited the first quarter of 2022 with better-than-expected results. Its noteworthy acquisitions will likely boost the top line in the long term. However, foreign exchange headwinds and stiff competition raise apprehension over the company.
In the past year, the Zacks Rank #3 (Hold) stock has declined 11.5% compared with a 27.5% fall of the industry and a 9.4% drop in the S&P 500.
The renowned manufacturer of medical devices and products has a market capitalization of $54.28 billion. Its earnings for the first quarter of 2022 topped the Zacks Consensus Estimate by 2.6%.
In the past five years, the company’s earnings grew 8.1%, compared to the industry’s 8.9% growth and the S&P 500’s 13.4% increase. The company’s long-term projected growth of 10.8% compares with the industry’s growth projection of 15.3% and the S&P 500’s expectation of 10.8% growth.
Image Source: Zacks Investment Research
Let’s delve deeper.
Factors At Play
Q1 Upsides: Boston Scientific’s first-quarter adjusted earnings and revenues surpassed the Zacks Consensus Estimate. Total operational sales rose 13% from the prior-year quarter’s levels. Organic sales increased 10% from the high end of the company guidance. The company’s performance was strong across all regions, where all of its businesses rose at or faster than their respective markets. Despite continued macroeconomic headwinds and resulting supply chain pressure, the first-quarter adjusted operating margin was 25.8%, higher than anticipated. The upside can be attributed to the overachievement of sales and lower spending.
The company also raised its 2022 operational growth expectation to 9-11% and organic growth expectation to 6.5-8.5%.
Impressive Value-Adding Acquisitions: We are encouraged by Boston Scientific’s recent acquisitions that have added numerous products with immense potential. In Feb 2022, the company completed the purchase of Baylis Medical Company for an upfront payment of $1.75 billion. This acquisition is expected to expand the company’s electrophysiology and structural heart product offerings. The company also closed the acquisition of Devoro in the fourth quarter and is currently looking forward to launching its arterial and venous offerings in the second half of 2022.
The acquisition of Israel-based Lumenis expands the company’s urology portfolio with the addition of differentiated laser technology. Meanwhile, the acquisition of Preventice Solutions establishes a strong position for Boston Scientific in the field of cardiac diagnostics.
Electrophysiology Business Grows: During the first quarter, Boston Scientific’s electrophysiology sales were up 11% organically year over year. The company exhibited robust international strength driven by its advanced portfolio and the continued success of Farapulse. The acquisition of Farapulse, a leader in pulsed-field ablation, expanded the company’s electrophysiology portfolio to include the FARAPULSE Pulsed Field Ablation System.
Downsides
Mounting Expenses: In the first quarter, Boston Scientific’s selling, general and administrative expenses rose 4%, while research and development expenses rose 15.6% year over year. These escalating operating expenses are weighing on the company’s bottom line.
Exposure to Currency Movement: With Boston Scientific recording 47% of its sales from the international market, it remains highly exposed to currency fluctuations. In the first quarter, the company’s total revenues reflected a $74 million headwind from foreign exchange, driven by the strengthened U.S. dollar.
Competitive Landscape: The presence of a large number of players has made the medical devices market highly competitive. Boston Scientific participates in several markets, including Cardiovascular, CRM, Endosurgery and Neuromodulation, where it faces competition from large, well-capitalized companies and several other smaller companies.
Estimate Trend
In the past 90 days, the Zacks Consensus Estimate for Boston Scientific’s 2022 earnings has moved 0.6% down to $1.76.
The Zacks Consensus Estimate for 2022 revenues is pegged at $12.85 billion, suggesting an 8.1% rise from the 2021 reported number.
Key Picks
A few better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Medpace Holdings, Inc. (MEDP - Free Report) and UnitedHealth Group Incorporated (UNH - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 1.1%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.6%, on average. It currently flaunts a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 5.1% against the industry’s 65.3% fall.
Medpace has a historical growth rate of 27.3%. Medpace’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%. It currently has a Zacks Rank #2.
Medpace has outperformed its industry in the past year. MEDP has declined 15.9% compared with the industry’s 65.3% fall.
UnitedHealth has an estimated long-term growth rate of 14.8%. UnitedHealth’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%. It currently carries a Zacks Rank #2.
UnitedHealth has outperformed the industry over the past year. UNH has gained 21.9% compared with 19% industry growth in the said period.