BSX Upgraded to Outperform - Analyst Blog
August 08 2011 - 11:00AM
Zacks
Recently, we upgraded
Boston Scientific Corporation (BSX) to Outperform
with a target price of $7.75.
Boston Scientific reported an EPS
of 10 cents during the second quarter of fiscal 2011 compared to 6
cents in the year-ago period. However, after considering certain
adjustments (other than amortization expense), the adjusted EPS
came in at 12 cents, beating the Zacks Consensus Estimate of 8
cents and the year-ago quarter’s 6 cents.
Revenues increased 2.4% year over
year to $1.975 billion during the quarter, surpassing the Zacks
Consensus Estimate of $1.936 billion. However, excluding the impact
of foreign currency and sales from divested businesses, net sales
remained unchanged.
Boston Scientific is a leading
player in the CRV industry and has made significant progress in its
‘Priority Growth Initiatives’ through some recent acquisitions and
several internal growth programs. Technologies from these
initiatives, to be commercialized in 2011 and 2012, are integral to
the realignment of the company’s portfolio for future growth.
After several quarters, growth in
the Cardiovascular portfolio came as a pleasant surprise. While the
launch of Ion in the US helped the company increase its share in
the DES market, the launch of Promus Element is now expected before
the original timeline of June 30, 2012.
The company is leaving no stone
unturned to keep itself on the growth track. These include
technological developments through acquisitions, restructuring
program, debt reduction and a new $1 billion share repurchase
program.
The restructuring program will
involve standardizing and automating certain processes, relocating
selected administrative and functional activities and other
activities to increase overall productivity. This program is
expected to reduce annual pre-tax operating expenses by $225-$275
million exiting 2013 and a part of this saving will be invested in
the business to drive growth going ahead.
The steps will begin in the third
quarter, to be completed by the end of 2013 and likely to result in
the reduction of 1,200 to 1,400 positions globally. During the
Analyst Day in 2010, the restructuring program had been discussed
and based on the recent one, the company plans to execute one among
several steps to achieve its previously targeted savings of
$650-$750 million (to materialize in 2012-13).
Having established a strong
foothold in the US and Europe, Boston Scientific is looking at
establishing its presence in the emerging markets of Brazil, India
and China that recorded 20% growth during the quarter and holds
immense potential. The company announced an additional investment
of $150 million in China over the next 5 years.
The company has decided on a number
of steps to expand its presence in China that includes setting up
of manufacturing operations, building a physician training center
and increasing the headcount to more than 1,200 employees
(including the increase in sales force to 700 people). The company
expects to increase global market share by tapping the huge
potential in emerging markets.
However, the CRM market in the US,
which declined in high single digits during the reported quarter,
continues to be the primary area of concern. The company expects
the global CRM market to show a slightly negative growth in the
near term and then return to modest growth in low single digits
within the next couple of years.
A further deterioration in the CRM
market could negatively impact the company’s top line. Additional
challenges concerning the company are softness in procedural
volume, delays in new products and competitive product launches.
The company faces tough competition from players like
Medtronic (MDT) and St Jude
Medical (STJ), among others.
BOSTON SCIENTIF (BSX): Free Stock Analysis Report
MEDTRONIC (MDT): Free Stock Analysis Report
ST JUDE MEDICAL (STJ): Free Stock Analysis Report
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