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Boston Scientific (BSX) Grows Operationally Amid Macro Issues
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Boston Scientific (BSX - Free Report) is gaining traction in emerging markets, particularly in the BRIC zone. Also, accretive acquisitions and significant progress in the company’s restructuring initiatives buoy optimism. Unfavorable currency movement and strong competitors in the large medical device market pose a tough challenge for Boston Scientific. 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 11.3% compared with the industry’s 31.3% fall. Boston Scientific ended the second quarter of 2022 on a bullish note, with adjusted earnings and revenues surpassing the Zacks Consensus Estimate.
Total operational sales grew 10% from the prior year, while organic sales grew 7% year over year (despite strong 9% organic growth comparison in the second quarter of 2021 versus 2019). The reported quarter’s organic revenue growth also exceeded the high end of the company’s guidance range of 3% to 6%. The company’s organic growth performance was strong across all regions, where most of its businesses grew at the same rate or faster than its competitors in the respective markets.
In the United States, Boston Scientific delivered operational growth of 7% despite contrast dye shortage primarily impacting the coronary therapies, WATCHMAN and PI business. In Europe, the Middle East, Africa, the business grew 12% on an operational basis on robust broad-based growth across the EMEA region, with five of eight business units posting double-digit growth.
Key products in emerging markets within the region are driving growth across the portfolio with particular strength in electrophysiology, WATCHMAN and interventional cardiology therapies. In the Asia Pacific, Boston Scientific grew 11% operationally with notable performance in Japan, India and the ASEAN countries.
On the flip side, during the second quarter, Boston Scientific’s total revenues reflected a $130 million or 420 basis points headwind from foreign exchange, higher than the company’s expectations due to a stronger U.S. dollar. Although the company currently expects some stabilization in the cost of freight, it anticipates incremental second-half headwinds of approximately $75 million versus the pre-COVID level, resulting from inefficiencies in manufacturing plants due to the availability of direct materials and the cost to procure them.
This incremental $75 million brings the total headwind versus 2019 to $375 million. This headwind is primarily due to inflationary pressure on direct materials, freight and labor costs, as well as inefficiencies in manufacturing plants due to material availability.
The company now expects the full-year adjusted gross margin to be slightly below the second half of 2021 adjusted gross margin of 70.8%. Due to the increased macroeconomic pressure on gross margin, the company anticipates the full-year adjusted operating margin to be within a range of 26% to 26.2%.
Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , Patterson Companies, Inc. (PDCO - Free Report) and McKesson Corporation (MCK - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 3.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.7%, on average. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has lost 7.8% against the industry’s 36.4% fall.
Patterson Companies has an estimated long-term growth rate of 7.9%. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 16.5%. It currently flaunts a Zacks Rank #2 (Buy).
Patterson Companies has outperformed its industry in the past year. PDCO lost 6.1% compared with the industry’s 13.6% fall in the past year.
McKesson has an estimated long-term growth rate of 9.9%. The company surpassed earnings estimates in the trailing three quarters and missed in one, delivering a surprise of 13%, on average. It currently carries a Zacks Rank #2.
McKesson has outperformed its industry in the past year. MCK has gained 79.3% against the industry’s 13.6% fall.
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Boston Scientific (BSX) Grows Operationally Amid Macro Issues
Boston Scientific (BSX - Free Report) is gaining traction in emerging markets, particularly in the BRIC zone. Also, accretive acquisitions and significant progress in the company’s restructuring initiatives buoy optimism. Unfavorable currency movement and strong competitors in the large medical device market pose a tough challenge for Boston Scientific. 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 11.3% compared with the industry’s 31.3% fall. Boston Scientific ended the second quarter of 2022 on a bullish note, with adjusted earnings and revenues surpassing the Zacks Consensus Estimate.
Total operational sales grew 10% from the prior year, while organic sales grew 7% year over year (despite strong 9% organic growth comparison in the second quarter of 2021 versus 2019). The reported quarter’s organic revenue growth also exceeded the high end of the company’s guidance range of 3% to 6%. The company’s organic growth performance was strong across all regions, where most of its businesses grew at the same rate or faster than its competitors in the respective markets.
In the United States, Boston Scientific delivered operational growth of 7% despite contrast dye shortage primarily impacting the coronary therapies, WATCHMAN and PI business. In Europe, the Middle East, Africa, the business grew 12% on an operational basis on robust broad-based growth across the EMEA region, with five of eight business units posting double-digit growth.
Boston Scientific Corporation Price
Boston Scientific Corporation price | Boston Scientific Corporation Quote
Key products in emerging markets within the region are driving growth across the portfolio with particular strength in electrophysiology, WATCHMAN and interventional cardiology therapies. In the Asia Pacific, Boston Scientific grew 11% operationally with notable performance in Japan, India and the ASEAN countries.
On the flip side, during the second quarter, Boston Scientific’s total revenues reflected a $130 million or 420 basis points headwind from foreign exchange, higher than the company’s expectations due to a stronger U.S. dollar. Although the company currently expects some stabilization in the cost of freight, it anticipates incremental second-half headwinds of approximately $75 million versus the pre-COVID level, resulting from inefficiencies in manufacturing plants due to the availability of direct materials and the cost to procure them.
This incremental $75 million brings the total headwind versus 2019 to $375 million. This headwind is primarily due to inflationary pressure on direct materials, freight and labor costs, as well as inefficiencies in manufacturing plants due to material availability.
The company now expects the full-year adjusted gross margin to be slightly below the second half of 2021 adjusted gross margin of 70.8%. Due to the increased macroeconomic pressure on gross margin, the company anticipates the full-year adjusted operating margin to be within a range of 26% to 26.2%.
Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , Patterson Companies, Inc. (PDCO - Free Report) and McKesson Corporation (MCK - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 3.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.7%, on average. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has lost 7.8% against the industry’s 36.4% fall.
Patterson Companies has an estimated long-term growth rate of 7.9%. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 16.5%. It currently flaunts a Zacks Rank #2 (Buy).
Patterson Companies has outperformed its industry in the past year. PDCO lost 6.1% compared with the industry’s 13.6% fall in the past year.
McKesson has an estimated long-term growth rate of 9.9%. The company surpassed earnings estimates in the trailing three quarters and missed in one, delivering a surprise of 13%, on average. It currently carries a Zacks Rank #2.
McKesson has outperformed its industry in the past year. MCK has gained 79.3% against the industry’s 13.6% fall.