Will Boston Scientific Stock See Higher Levels?

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Boston Scientific

[Updated: 7/30/2021] BSX Stock Update

Boston Scientific (NYSE:BSX) recently reported its Q2 results, which were better than the street estimates. The company reported sales of around $3.1 billion, up a large 53% y-o-y, and it was better than the consensus estimate of $2.94 billion. While the Cardiovascular segment saw a 51% rise in sales, MedSurg and Rhythm & Neuro saw a large 65% growth each. Note that Q2 2020 was the worst affected quarter for elective surgeries, due to the lockdowns during the spread of Covid-19. As such, the Q2 2021 revenue compared favorably over the last year quarter’s very low sales figure.

Looking at the bottom-line, the company reported adjusted earnings of $0.40 per share, up 5x y-o-y, driven by both an increase in revenue as well as margin expansion. The company managed to leverage sales growth, along with increased sales of high-margin products, that led to margin expansion. The margins are expected to remain high in the near term.

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Following a solid performance in Q2, Boston Scientific raised its full year outlook for sales to increase 19-20% and adjusted earnings to be in the range of $1.58-$1.62 per share. We have also updated our model following the Q2 release. We maintain the sales forecast to be around $11.8 billion, up 20% y-o-y, and adjusted EPS to be $1.60, at the mid-point of the company’s provided guidance, and just a cent higher than our earlier estimate of $1.59. Given that there has been no meaningful change in our revenues and earnings forecast, we are maintaining our Boston Scientific Valuation at under $49 per share, based on $1.60 expected adjusted EPS and a little under 31x P/E multiple for 2021. However, despite no change to our estimate, we see there is a little room left for growth in BSX stock from its current levels of under $45.

[Updated: 7/22/2021] Boston Scientific Q2 Earnings Preview

Boston Scientific (NYSE:BSX) is scheduled to report its Q2 2021 results on Tuesday, July 27. We expect Boston Scientific to report revenues and earnings in-line with the consensus estimates, driven by a rebound in demand for medical devices. While we don’t expect any earnings surprise from Boston Scientific, its stock remains attractive in our view. Trefis’ forecast indicates that Boston Scientific’s valuation is $49 per share, which is 13% higher than the current market price of under $44. Our interactive dashboard analysis on Boston Scientific’s Pre-Earnings has additional details.

(1) Revenues expected to be in-line with the consensus estimates

Trefis estimates Boston Scientific’s Q2 2021 revenues to be around $2.94 Bil, in-line with the consensus estimate. Boston Scientific in Q2 2020 saw a large 24% decline in revenue, due to deferment of elective surgeries given the spread of Covid-19. Now that nearly half of the U.S. population is fully vaccinated, and on the international front, most of the countries have undertaken large-scale vaccination programs, the healthcare institutions now have more resources to address the surgeries that were postponed earlier, and people are also more confident heading out, compared to the lockdowns in Q2 last year, implying a rebound for Boston Scientific’s business. In fact, Boston Scientific’s sales were also up 8% in Q1 this year, led by double-digit growth in MedSurg and Cardiovascular segments. Our dashboard on Boston Scientific Revenues offers more details on the company’s segments.

2) EPS also likely to be in-line with the consensus estimates

Boston Scientific’s Q2 2021 adjusted earnings per share (EPS) is expected to be $0.37 per Trefis analysis, in-line with the consensus estimate. Boston Scientific’s adjusted net income of $524 Mil in Q1 2021 reflected a solid 34% growth from its $391 Mil figure in the prior-year quarter. This can be attributed to higher revenues and over 350 bps rise in net margins, led by lower R&D and amortization expenses. This trend is expected to continue in Q2 as well, bolstering the overall earnings growth. For the full-year, we expect the adjusted EPS to be higher at $1.59 compared to $0.97 in 2020.

(3) Stock price estimate 13% higher than the current market price

Going by our Boston Scientific’s Valuation, with an EPS estimate of around $1.59 and a P/E multiple of around 31x in 2021, this translates into a price of $49, which is 13% above the current market price of under $44. At current levels of around $44, BSX is trading at 28x its expected EPS of $1.59 in 2021, and the 28x figure compares with levels of 29x seen in 2018 and 37x as recently as late 2020, implying there is more room for growth in BSX stock.

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year

While BSX stock looks attractive at its current levels, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Mettler vs Abbott.

See all Trefis Price Estimates and Download Trefis Data here

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