Morgan Stanley Upgrades Boston Scientific on Pipeline Acceleration
In a report published Monday, Morgan Stanley analyst David Lewis upgraded Boston Scientific (NYSE: BSX) from Equal-weight to Overweight based on pipeline acceleration traction.
Despite disappointing pipeline progress in 2013 from Asthmatx reimbursement delays and S-ICD manufacturing constraints, Morgan Stanley expects sales results to improve. Morgan Stanley's updated model shows risk-adjusted pipeline sales of $90 million (130 bps) in 2014 and $145 million (180 bps) in 2015, which drives a $0.07 (8%) EPS accretion by 2015.
Lewis reported that Boston Scientific has the best opportunity for margin improvements in cardiology. The analyst commented, “At 19%, cash operating margins are depressed relative to peers. In particular, CRM margins of 12-13% are half those of competitors; normalizing CRM profitability alone could drive 15%+ upside to EPS over several years. Structural cost programs have done an impressive job of supporting the P&L during a multi-year contraction in revenue, but margin results should accelerate in a more visible way as revenue growth rates push into the mid single digits and drive much better leverage over a fully-loaded expense structure.”
Shares of Boston Scientific Corporation closed at $11.93 on Friday and is currently trading at $12.28, up 2.93%.
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