Boston Scientific (BSX) Last Update 11/29/20
Related: ABT MDT ISRG
% of Stock Price
Revenue
Gross Profits
Free Cash Flow
Boston Scientific
STOCK PRICE
DIVISION
% of STOCK PRICE
Cardiovascular
41.8%
$19.52
MedSurg
30.9%
$14.44
Rhythm Management
24.7%
$11.50
Net Debt
11.0% $5.11
TOTAL
100%
$46.65
$41.54
Yours
Trefis Price
N/A
$36.43
Market
 
Top Drivers for Period
Key Drivers
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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

Boston Scientific Company

VALUATION HIGHLIGHTS

  1. Cardiovascular constitutes 42% of the Trefis price estimate for Boston Scientific's stock.
  2. MedSurg constitutes 31% of the Trefis price estimate for Boston Scientific's stock.
  3. Rhythm Management constitutes 25% of the Trefis price estimate for Boston Scientific's stock.

WHAT HAS CHANGED?

Coronavirus Crisis Impact On Boston Scientific's Stock

Boston Scientific stock (NYSE:BSX) lost more than 42% – dropping from $45 at the beginning of the year to below $26 in late March – then spiked 38% to around $36 now. That means it has partially recovered to the levels where it started the year.

Why? While the Covid-19 outbreak and associated lockdowns resulted in an uncertain outlook for the broader markets, the multi-billion-dollar Fed stimulus announced in late March helped the markets stage a strong recovery. Further, with economies opening up gradually, the elective surgeries that were deferred earlier in April and May are now getting addressed, though there is a huge backlog. As such, demand for Boston Scientific's products will likely pick up over the coming quarters. In addition, the company posted better than expected Q3 results, boding well for BSX stock.

Q3 2020 Performance

Boston Scientific's revenues declined 1.8% (y-o-y) to $2.7 billion in Q3 2020, with revenue decline across all major segments. The adjusted EPS came in at $0.37 vs $0.39 in the prior year quarter, reflecting a 5.4% dip. That said, the results were better than street estimates, and the company expects to see organic growth from Q4.

Spree of Acquisitions

Boston Scientific announced 10 acquisitions over the last year or so. Recently, the company closed the acquisition of spine solutions maker Vertiflex for an upfront cash payment of $465 million, and also BTG plc acquisition, which added $71 million to the company's top line in Q3. The company expects these acquisitions to aid its long term growth.

Long Term Growth Strategy

Boston Scientific recently unveiled its medium to long term growth strategy, and it targets double-digit adjusted earnings growth, driven by margin improvements. The company is aiming for an organic revenue CAGR of 6-9% during the 2020-2022 time frame.

Stock Price Movement

Boston Scientific's stock has been on a strong run. It saw around 35% growth in 2018, and it was up 29% in 2019. The company's earnings growth has aided the stock price move over the recent years.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Boston Scientific's value that present opportunities for upside or downside to the current Trefis price estimate for the company's stock:

Interventional Cardiology

  • Boston Scientific's Cardiovascular Revenue: This is the most important division and the biggest source of revenue for Boston Scientific. As the company continues to innovate its drug eluting stent technology (DES) and its Transcatheter Aortic Valve (TAVR) system, we expect the company to retain its market share over our forecast period.
    The Promus PREMIER stent has been gaining widespread acceptance. Meanwhile, the SYNERGY stent continues to perform strongly by representing more than 25% of the company’s total European DES sales. Similarly, the product offerings of the company's structural heart business is expected to sustain its growing market share. The Lotus TAVR has been reporting impressive growth in the international market. Another product that could bolster revenue for the IC division is the Watchman device that received FDA approval in 2015. As the segment is the largest revenue contributor, and constitutes more than 35% of our price estimate, even a small out-performance with respect to our expectations will have a huge impact on the company's valuation.

MedSurg

  • Boston Scientific's MedSurg Revenue: This division is the second biggest revenue source for Boston Scientific. We forecast the company's market share to remain steady, resulting in moderate growth in revenue. The segment includes Women's Health, Urology, as well as the Endoscopy business. The segment revenues have been growing at a fast pace, and this trend is expected to continue in the coming years. Going ahead, if the company improves its market share significantly and the segment's revenue increases by an additional $2 billion by the end of our forecast period, there can be more than 15% upside to our price estimate.

BUSINESS SUMMARY

Founded in 1979, The Boston Scientific Corporation develops, manufactures, and supplies medical devices across the world. These devices are primarily sold in the following areas of medicine - Interventional Cardiology, Cardiac Rhythm Management, Endoscopy, Peripheral Interventions, Urology/Women's Health, Neuromodulation, and Electrophysiology. The company's largest sources of revenue are sales of Interventional Cardiology and Cardiac Rhythm Management devices.

Boston Scientific supplies its devices in around 125 countries around the world, mainly the U.S., Europe, the Middle East, Japan, Canada, China, India, and Brazil. The company historically has been very acquisitive in order to strategically expand its operations and sales.

Its main competitors are Johnson & Johnson, Medtronic, and Abbott.

SOURCES OF VALUE

Interventional Cardiology, Endoscopy, and Cardiac Rhythm Management are the major sources of revenue for the company. Here's why:

Continuous innovation and product improvement

Coronary stents are implantable tubes which help in opening blocked arteries and ensuring smooth blood flow. These are the largest revenue driver for Boston Scientific as it is the only company in the world to provide a two-drug platform. The company keeps launching improved versions of these stents to maintain its market leadership position. Following the same trend, the company launched Promus PREMIER Element, an improved version of its drug-eluting stent (DES) technology in 2013 along with the next generation line of defibrillators and pacemakers. Continuous innovation and product improvement should allow Boston Scientific to maintain a healthy market share and increase its revenue base from the division, in our view.

Acquisitions to capture more market share

Acquisitions have always been an integral part of Boston Scientific's growth strategy. In 2011, the company acquired Sadra Medical and Atritech in order to increase the market share of its respective structural heart therapy and atrial fibrillation businesses, which fall in the Interventional Cardiology division. It also acquired Cameron Health which has strengthened the sales of its Cardiac Rhythm Management business.

KEY TRENDS

COVID-19 impact

The current coronavirus crisis will likely impact Boston Scientific on two fronts, 1. supply chain disruptions, and 2. decline in sales due to postponement of elective surgeries. While it is difficult to time the worst, procedure growth could get back to a normal growth rate as soon as Q3 or Q4, thereby fueling growth for medical companies. Boston Scientific's stock is down by about -14% since early February (through May 1), after the WHO declared a global health emergency.

Launch of new products

Boston Scientific spends a significant portion of its revenues on research and development. As a result it has been able to launch many self-manufactured products in the market. In the last few years, the company has launched a few new devices in its major segments. For instance, the company launched its RESONATE™ cardiac resynchronization therapy defibrillator (CRT-D) systems in Europe in 2017, and it has been fueling defibrillator growth.

Acquisitions in all segments

Following its historical acquisition strategy, Boston Scientific has acquired several companies in the last few years in order to expand its product portfolio. Most recently in 2018, the company acquired NXThera for $406 million. It also intends to acquire BTG plc, and Millipede Inc.

Restructuring program

Boston Scientific is undertaking a restructuring program which aims to improve efficiency and innovation. This should help improve its market presence while also cutting costs, benefiting margins.

Healthcare reform could impact selling prices

Stringent healthcare regulations have implemented checks on the pricing structure of medical device companies, which could have a negative impact on global revenue growth.