Is Boston Scientific Stock A Good Buy At $43?

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Boston Scientific

[Updated: Feb 15, 2022] BSX Stock Trades Sideways

We believe that Boston Scientific stock (NYSE: BSX) is a good buying opportunity at the current levels. Earlier this month the company released its Q4 earnings, which were better than our estimates. Boston Scientific’s revenue of $3.1 billion (up 15% y-o-y), was in-line with our estimate, as well as the consensus. The sales growth was driven by a good 25% sales growth for the company’s Cardiovascular segment, while MedSurg and Rhythm & Neuro both saw 12% growth. Looking at the bottom line, Boston Scientific reported adjusted earnings of $0.45 on a per share and adjusted basis, compared to $0.23 in the prior-year quarter. The earnings were better than our estimate of $0.43 and the consensus estimate of $0.44 per share.

BSX stock moved marginally higher from levels of $43 on Feb 1 to levels of around $45 on Feb 9 before cooling off back to levels of $43 currently. A tepid stock price performance post Q4 announcement can be attributed to the company’s outlook for 2022. Boston Scientific expects the 2022 sales to grow between 6% and 8%, compared to 9% per the consensus estimate. Similarly, the company expects its adjusted EPS to be between $1.73 and $1.79, compared to the consensus estimate of $1.87. This outlook did not bode well with the investors.

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Now, we have updated our model to reflect the latest quarterly numbers for Boston Scientific. We estimate Boston Scientific’s Valuation to be $51 per share, reflecting an upside of around 18% from its current levels of $43. This represents a P/E multiple of 28x based on our $1.80 expected EPS for 2022. Our forecast is marginally above the higher end of the company’s provided range. We believe that the company’s outlook for 2022 is conservative. The slower growth outlook can largely be attributed to the spread of Omicron and its impact on elective surgeries, primarily in Q1’22, but as the year progresses, sales are likely to pick up the pace. Looking at the valuation, the 28x P/E multiple is in-line with the average seen between 2018 and 2021. Given the upside potential, we believe that investors can use the current dip in BSX stock to buy for long-term gains.

But what about the near-term outlook for Boston Scientific stock?

Given that BSX stock has seen a decline of 4% in a month, will it continue its downward trajectory, or is a rise imminent? Going by historical performance, there is a higher chance of an increase in BSX stock over the next monthOut of 423 instances in the last ten years that BSX stock saw a twenty-one-day fall of 4% or more, 255 of them resulted in BSX stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 255 out of 423, or a 60% chance of a rise in BSX stock over the coming month, implying that BSX stock is a reasonable bet at its current levels, even for the short term, in our view. See our Boston Scientific Stock Chance of A Rise analysis for more details.

 

[Updated: Jan 31, 2022] Boston Scientific’s Q4 Earnings Preview

Boston Scientific (NYSE:BSX) is scheduled to report its Q4 2021 results on Wednesday, Feb 2. We expect the company to report revenues in-line but earnings marginally below the consensus estimates, as the rise of Covid-19 cases with the spread of Omicron, likely weighed on the overall procedures volume, while the rise of material cost and wages may adversely impact the company’s operating margin growth. While we don’t expect any earnings surprise from Boston Scientific, its stock has some more room for growth, in our view, as we discuss in the sections below. Our interactive dashboard analysis on Boston Scientific’s Earnings Preview has additional details.

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

  • Trefis estimates Boston Scientific’s Q4 2021 revenues to be around $3.1 billion, in-line with the consensus estimate.
  • While the revenue estimate reflects a y-o-y growth in early teens percentage, the sales are likely to have faced headwinds from the spread of Omicron variant starting December.
  • Hospital staffing shortage due to the spread of Omicron is expected to result in fewer procedures performed in Q4 as well as Q1.
  • Looking back at Q3, the company reported a 10% y-o-y rise in sales to $2.9 billion, led by a healthy 19% growth for its Cardiovascular segment, an 11% growth for MedSurg, and 8% rise in Rhythm & Neuro sales.
  • Our dashboard on Boston Scientific Revenues offers more details on the company’s segments.
  • The sales growth over the recent quarters has partly been driven by the company’s Left Atrial Appendage Closure (LAAC) device – Watchman – which continues to gain market share driven by higher physician utilization rate, and this trend is expected to continue in the near term.

(2) EPS likely to be marginally below the consensus estimates

  • Boston Scientific’s Q4 2021 adjusted earnings per share (EPS) is expected to be $0.43 per Trefis analysis, just a cent below the consensus estimate of $0.44.
  • Boston Scientific’s adjusted net income of $581 million in Q3 2021 reflected a 10% growth from its $531 million figure in the prior-year quarter.
  • With inflationary pressure and near-term impact on sales from the Omicron spread may weigh on the company’s operating margin expansion in Q4.
  • With the economic recovery and a robust demand outlook, Boston Scientific’s operating margins are expected to improve over the next few quarters. For the full-year 2022, we expect the adjusted EPS to be higher at $1.86 compared to $0.97 in 2020, and an estimated $1.61 in 2021.

(3) BSX stock appears to have some more room for growth

  • We estimate Boston Scientific’s Valuation to be $49 per share, which is 15% above the current market price of $43.
  • This represents a forward P/EBITDA of 39x based on Boston Scientific’s EBITDA for the last twelve months.
  • That said, if the company reports upbeat results, with sales and earnings growth as well as 2022 guidance better than the street estimates, it is likely that the P/EBITDA multiple will be revised upward, resulting in even higher levels for BSX stock.

While BSX stock is likely to see little movement in the near term, based on our Q4FY21 expectations, there are several peers in its sector that look like a better bet than Boston Scientific. Check out how Boston Scientific Peers fare on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

Returns Feb 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 BSX Return 0% 1% 98%
 S&P 500 Return -2% -7% 97%
 Trefis MS Portfolio Return 1% -9% 258%

[1] Month-to-date and year-to-date as of 2/15/2022
[2] Cumulative total returns since the end of 2016

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