Boston Scientific (BSX) is currently priced around $40 per share. This medical device maker creates equipment used in the field of interventional medicine such as interventional radiology, vascular surgery, cardiac surgery, urology, oncology, endoscopy, gynecology and several other medical specialties. However, the company’s recent financials disappointed Wall Street.
Though revenue spiked a somewhat-disappointing 6% on a year-over-year basis, Boston Scientific still has a solid top-line performance. The company’s quarterly revenue is a whopping $2.50 billion. Its net income is up more than 40% on a quarterly basis compared to the year prior. Earnings and revenue are both growing, partially because the company has a well-diversified portfolio of medical devices.
Boston Scientific’s Lotus Edge, a breakthrough aortic valve system, recently received approval from the Food and Drug Administration (FDA). The company has high expectations for its Clear-DVT that will likely significantly reduce the number of post-thrombotic syndrome occurrences in those who have suffered iliofemoral deep vein thrombosis. The company anticipates 2019 sales to be 8%. Estimated income is likely to be around $1.12 per share, coming in below the expected $1.18. Adjusted earnings will likely hover in the range of $1.55 to $1.58 per share, right in line with the company’s prior guidance. Boston Scientific executives anticipate revenue growth will spike 6% on a quarterly basis for the foreseeable future. Mike Mahoney, BSX’s CEO, anticipates the company’s robust medical device pipeline will propel Boston Scientific to the upper end of financial expectations in upcoming quarters and beyond.
The United States Food and Drug Administration recently cracked down Boston Scientific as well as other medical device providers for supposedly flawed surgical mesh products. The FDA’s demand for the company to halt sales of its surgical mesh products used in pelvic operations sent BSX’s stock down nearly 5%. However, surgical mesh products are merely one of many medical devices made and sold by Boston Scientific. Investors should view this setback as a temporary blip on the radar. It is important to remember Boston Scientific makes the bulk of its money from heart-related devices as opposed to surgical mesh products.
Those who follow Boston Scientific’s stock are well aware of the fact that this medical device provider might be acquired by another business. In particular, Stryker (SYK) is supposedly in acquisition negotiations with Boston Scientific’s brass. Though there is certainly the potential for Boston Scientific to be acquired, it appears as though the company will not be bought out in the near future.
Boston Scientific upended a looming merger between Guidant and J&J by bidding $27 billion for the cardiovascular product maker. Boston Scientific’s bid came in about $6 billion higher than J&J’s. J&J received more than $700 million in the form of a break-up fee after the failed acquisition attempt. J&J proceeded to file a $7 billion lawsuit against BSX, arguing the company illegally interfered with its plan to acquire Guidant. The lawsuit alleges Guidant provided Boston Scientific with important information that should have been protected through a pre-established confidentiality agreement. This litigation resulted in a $600 million settlement paid out by Boston Scientific. Unfortunately, Guidant products did not generate the profits anticipated by Boston Scientific executives. In fact, plenty of Guidant’s products were subsequently recalled. Some Guidant products triggered lawsuits. As a result, Boston Scientific wrote off $6.3 billion for this misguided acquisition. The vast majority of investors have stayed far away from Boston Scientific after the Guidant fiasco. Time will tell if BSX brass has learned from this gargantuan mistake.
Current Boston Scientific stockholders should retain their shares for the long haul. Even if the company is not acquired, its medical devices are likely to be in demand for the foreseeable future. Sales of Boston Scientific’s devices soared more than 11% in the first quarter of this year, generating nearly $2 billion in revenue. The company’s heart-related devices accounted for $790 million of this revenue, while its rhythm management devices generated nearly $500 million in sales.
The bottom line is the future still looks bright for Boston Scientific, especially when you consider the fact that the massive baby boomer age cohort is transitioning to its retirement years. There will be a strong demand for Boston Scientific’s medical devices as the boomers enter nursing homes and other assisted living facilities in the years ahead. If Boston Scientific is not in your portfolio, you should consider buying it today.
Regards,
Ethan Warrick
Editor
Wealth Authority
