BSX to Prosper Under New President - Analyst Blog
September 30 2011 - 10:15AM
Zacks
Earlier this month, Boston
Scientific (BSX) named Michael Mahoney as the President of
the company effective October 17, 2011. Mahoney, the Worldwide
Chairman of the Medical Devices and Diagnostics Group of
Johnson & Johnson (JNJ) is expected to occupy
the post of CEO of Boston Scientific from November 1, 2012.
In May 2011, Ray Elliott had
announced his intention to step down as the President and CEO and
confirms to do so on October 17, 2011. Subsequently, Hank Kucheman,
the Executive Vice President and Group President of the Cardiology,
Rhythm and Vascular will serve as the interim CEO until Mahoney
assumes the role. Ray Elliott will be able to assist Kucheman and
Mahoney until he retires at the end of 2011.
During the most recent quarter,
revenues increased 2.4% year over year to $1.975 billion. However,
excluding the impact of foreign currency and sales from divested
businesses, net sales remained unchanged. The company also
announced a restructuring program to increase productivity through
zero-based budgeting and Emerging Market Initiative. The program is
expected to result in $225-$275 million of gross annual savings
exiting 2013. About 1,200-1,400 positions will be reduced globally
(through employee attrition and targeted headcount reduction) as a
part of this program and result in $155-$210 million of pre-tax
charges.
During Ray Elliott's tenure, (since
July 2009), Boston Scientific achieved several milestones. These
include adopting Priority Growth Initiatives to address critical
and unmet future patient needs, creation of robust pipeline and
focusing on emerging markets. Moreover, the company was able to
reduce its debt burden, improve liquidity and generate robust free
cash flow of more than $1.2 billion annually.
At present Boston Scientific is
witnessing several challenges as its core businesses consisting of
stents and defibrillators are witnessing significant pricing
pressure and loss of market share. As a result, the new CEO will
have a few daunting tasks ahead. Moreover, uncertainty remains
regarding the strategy he would adopt to turn around the
company.
We currently have an Outperform
recommendation on the stock, which also corresponds with the Zacks
#2 Rank (Buy) in the short term. The company faces stiff
competition from players such as Medtronic (MDT)
and St Jude Medical (STJ), both carrying Zacks #3
ranks (Hold) along with Neutral recommendations.
BOSTON SCIENTIF (BSX): Free Stock Analysis Report
JOHNSON & JOHNS (JNJ): Free Stock Analysis Report
MEDTRONIC (MDT): Free Stock Analysis Report
ST JUDE MEDICAL (STJ): Free Stock Analysis Report
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