MedSurg Will Likely Drive Boston Scientific’s Near Term Earnings Growth

by Trefis Team
Boston Scientific
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Boston Scientific (NYSE:BSX) has seen steady top line growth in the recent quarters, led by robust demand for its products across all segments. The MedSurg segment in particular has seen high growth of late, led by higher demand for Endoscopy and Urology & Pelvic Health products. We expect this trend to continue in the near term, and the recent NxThera acquisition to further aid the segment revenue growth. We have created an interactive dashboard ~ What Is The Near Term Outlook For Boston Scientific on the company’s expected performance in 2018 and 2019. You can adjust the revenue and margin drivers to see the impact on the company’s earnings, and price estimate.

Expect MedSurg Revenues To Grow In High Single Digits In The Near Term

We forecast Boston Scientific’s MedSurg revenue to grow in high single digits in the near term, led by a continued growth in both Endoscopy, as well as Urology & Pelvic Health. Both of these divisions saw a low double digit revenue growth in the nine month period ending September 2018. We continue to believe that the segment growth will be bolstered by the introduction of new products, and a ramp up in the existing product line. The Endoscopy product line is seeing higher demand for Resolution 360 Clips, the SpyGlass DS Direct Visualization System, as well as the Acquire Endoscopic Ultrasound Fine Needle Biopsy Device. Urology & Pelvic Health division is benefiting from a ramp up in LithoVue Digital Flexible Ureteroscope, and Rezûm System, which is part of the recently completed NxThera acquisition. Looking at the margins, we forecast them to see modest growth to around 72% for the full year, led by cost cutting measures. 

Rhythm Management And Cardiovascular Revenues Will Likely Grow In Mid-To-High Single Digits

Boston Scientific’s Rhythm Management & Neuro segment revenues will likely grow in mid-to-high single digits in the near term. While we forecast a low single digit growth for Cardiac Rhythm Management, we believe the other two divisions, Electrophysiology and Neuromodulation, will see strong growth. In fact, Electrophysiology revenues were up 14% while Neuromodulation revenues were up 24% in the nine month period ending September 2018. Neuromodulation growth will likely be aided by the newly launched Spectra WaveWriter Spinal Cord Stimulator (SCS) Systems, while Electrophysiology revenues will be aided by the expansion of Rhythmia range mapping systems. However, Cardiac Rhythm Management continues to face pressure due to growing competition from Abbott in the recent past. Having said that, the company’s newly launched  Resonate platform will likely aid the division revenue growth in the coming quarters. 

Looking at the Cardiovascular segment, we forecast revenues to grow in mid-to-high single digits, driven by demand for the products in both divisions, Interventional Cardiology, as well as Peripheral Interventions, primarily led by strong demand for its drug eluting products. The company has seen increased demand for its drug-eluting products in Europe, and it has plans to launch similar products in the U.S. The company’s management recently stated that it has commenced the launch of Eluvia in the U.S. 

Overall, we believe that the MedSurg segment will be the key growth driver for the company in the near term.  We expect the company to post earnings of $1.40 in 2018. We forecast a TTM price to earnings multiple of around 27x, to arrive at our price estimate of $38 for Boston Scientific, which is at more than a 5% premium to the current market price.


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