Boston Scientific’s BSX growth in the third quarter of 2024 was backed by its successful expansion of operations across different geographies outside the United States. Its recent acquisitions are expected to drive revenue growth in the long term. Meanwhile, headwinds, such as currency movements and dull macroeconomic conditions, raise concern for Boston Scientific.
In the past year, this Zacks Rank #3 (Hold) company’s shares have rallied 66.1% compared with the industry’s 21.4% growth and the S&P 500 composite’s 29.2% gain.
The renowned manufacturer of medical devices and products has a market capitalization of $128.21 billion. BSX beat on earnings in each of the trailing four quarters, delivering an average surprise of 8.29%.
Let’s delve deeper.
Key Tailwinds for BSX
Impressive Value-Adding Acquisitions: Boston Scientific’s impressive recent acquisitions have added numerous products with immense potential. This, in turn, should help boost the top line in the long term. The company’s recently completed strategic buyouts include a $3.7 billion acquisition of Axonics. This acquisition is aimed at expanding BSX’s differentiated technologies portfolio within Urology. Additionally, the company completed the acquisition of Silk Road Medical for $1.16 billion. This acquisition should help the company progress in vascular medicine, where Silk Road has revolutionized stroke prevention and the treatment of carotid artery disease.
International Expansion Continues: Boston Scientific successfully expands operations across different geographies outside the United States. The company is putting additional efforts to expand its foothold in the emerging markets (which are defined as all countries except the United States, Western and Central Europe, Japan, Australia, New Zealand and Canada) that hold strong growth potentials based on their economic conditions, healthcare sectors and global capabilities.
Despite geopolitical weaknesses in the third quarter of 2024, the emerging market registered sturdy growth, primarily banking on continued broad-based momentum across the company’s business and investment in this region. During this period, emerging markets' net sales grew nearly 16.8% year over year on an operational basis.
In Europe, the Middle East and Africa (EMEA), Boston Scientific is successfully expanding its base on the back of its diverse portfolio, new launches and commercial execution with healthy underlying market demand.
In the third quarter, EMEA sales grew 14.3% year over year on an operational basis, banking on above-market performance in Electrophysiology. In Asia Pacific, Boston Scientific is particularly registering strong growth in China, Japan, Australia and New Zealand. It also grew in the mid-teens despite recent volume-based procurement implementations.
Key Headwinds for BSX
Exposure to Currency Movement: Boston Scientific records 40% of its sales from the international market. Therefore, it remains highly exposed to currency fluctuations. Unfavorable currency movements have been a major dampener over the past few quarters. In the second quarter, the company had a 160 basis-point impact on revenues from unfavorable currency fluctuations.
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Macroeconomic Headwinds Dent Growth: Difficult macroeconomic conditions, international conflicts, unstable financial market dynamics and volatility in the price and availability of goods and services are laying pressure on Boston Scientific’s profitability. With such sustained macroeconomic pressures, the company may struggle to keep its operating expenses in check.
In the third quarter of 2024, the company reported a 19.2% rise in the cost of products sold. Further, selling, general and administrative expenses rose 25.8%, resulting in a 123 basis point contraction in operating margin.
BSX’s Estimate Trend
The Zacks Consensus Estimate for 2024 earnings has increased 2.5% to $2.46 per share in the past 30 days.
The consensus estimate for 2024 revenues is pegged at $16.58 billion, which indicates a 16.4% increase from the year-ago reported numbers.
Key Picks
Some better-ranked stocks in the broader medical space are Haemonetics HAE, Globus Medical GMED and Penumbra PEN.
Haemonetics has an earnings yield of 5.02% compared with the industry’s 1.18%. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 19.39%. Its shares have risen 6.3% compared with the industry’s 21.4% growth in the past year.
HAE carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Globus Medical, carrying a Zacks Rank #2 at present, has a long-term estimated growth rate of 14.1%. Shares of the company have rallied 80.3% compared with the industry’s 15.7% growth. GMED’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 17.65%.
Penumbra, carrying a Zacks Rank #2 at present, has an estimated 2024 earnings growth rate of 33.5% compared with the industry’s 15.9%. Shares of Penumbra have risen 2.1% compared with the industry’s 15.7% growth over the past year. PEN’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 10.54%.
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