Boston Scientific Corporation BSX is gaining substantial contributions from its notable buyouts. The company posted better-than-expected results for the second quarter of 2022. The robust performance of the WATCHMAN device instills optimism. However, unfavorable currency movements and stiff competition raise apprehension.
In the past year, the Zacks Rank #3 (Hold) stock has declined 7% compared with a 48.4% fall of the industry and an 11.8% drop in the S&P 500.
The renowned manufacturer of medical devices and products has a market capitalization of $59.61 billion. Its earnings for the second quarter topped the Zacks Consensus Estimate by 4.8%.
In the past five years, the company’s earnings grew 8.1%, compared to the industry’s 9.7% growth and the S&P 500’s 13.4% increase. The company’s long-term projected growth of 10.5% compares with the industry’s growth projection of 13.5% and the S&P 500’s expectation of 11.5% growth.
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Let’s delve deeper.
Factors At Play
Impressive Q2 Results: Boston Scientific ended the second quarter of 2022 with adjusted earnings and revenues surpassing the Zacks Consensus Estimate. Total operational sales grew 10% from the prior year’s levels, while organic sales rose 7%. The reported quarter’s organic revenues also exceeded the high end of the company’s guidance range of 3-6%. BSX’s organic growth performance was strong across all regions, where most of its businesses grew faster than their competitors in their respective markets.
Impressive Value-Adding Acquisitions: Boston Scientific’s acquisition of Israel-based Lumenis has expanded the Urology portfolio with differentiated laser technology. Apart from this, the acquisition of Preventice Solutions grew 20% on a full-year pro forma basis in 2021, driven by the company’s differentiated portfolio and strong execution. In the second quarter of 2022, the Farapulse, Lumenis and Baylis Medical buyouts contributed 300 basis points to the company’s top-line growth.
Boston Scientific currently expects full-year 2022 operational revenue growth to include a 250-basis-point contribution from the acquisitions of Preventice, Farapulse, Lumenis and Baylis and $13 million of pre-divestiture specialty pharmaceutical sales in 2021.
WATCHMAN, a Long-Term Growth Component: Boston Scientific’s structural heart programs are fast building momentum, banking on the strong performance of the WATCHMAN left atrial appendage closure device. In the second quarter, WATCHMAN’s organic sales grew 17% on a year-over-year basis. Growth accelerated sequentially on a comp-adjusted basis led by strength across regions with a full launch of WATCHMAN FLX in Japan, market share gains in Europe and increased penetration in the United States. Also, the company commenced the first WATCHMAN FLX cases in China, Korea, Singapore and Malaysia.
Legal Hassles: Boston Scientific continues to incur escalating operating costs on its constant involvement in handling serious legal problems. In the second quarter, the operating margin was 13%, including a charge related to ongoing IP litigation.
Forex Woes: Boston Scientific remains highly susceptible to unfavorable currency fluctuations. In the second quarter, the company’s total revenues reflected a $130 million or 420-basis point headwind from the foreign exchange due to the strengthened U.S. dollar.
Competitive Landscape: The presence of many 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.
The Zacks Consensus Estimate for Boston Scientific’s 2022 earnings is pegged at $1.76, indicating a 7.9% increase from the 2021 reported number.
The Zacks Consensus Estimate for 2022 revenues is pegged at $12.73 billion, suggesting a 7.1% rise from the 2021 figure.
A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. AMN, ShockWave Medical, Inc. SWAV and McKesson Corporation MCK.
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 flaunts 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 6.1% against the industry’s 37% fall.
ShockWave Medical, sporting a Zacks Rank #1 at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
ShockWave Medical has outperformed its industry in the past year. SWAV has gained 35% against the industry’s 32.6% 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 (Buy).
McKesson has outperformed its industry in the past year. MCK has gained 71.1% against the industry’s 15.1% fall.
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