Boston Scientific (BSX) Faces Rising Costs, Competition

Boston Scientific Corporation BSX has been struggling due to unfavorable currency movement and macroeconomic woes. Strong competitors in the large medical device market also pose a tough challenge for Boston Scientific. The stock carries a Zacks Rank #4 (Sell) currently.

The industry-wide trend of challenging macroeconomic conditions in the form of inflation, disruptions in economic activity, global supply chains and labor markets, volatile financial market dynamics and significant volatility in price and availability of goods and services are putting pressure on Boston Scientific's profitability. Further, international conflicts, including the Russia-Ukraine war and tensions between China and Taiwan, have increased cybersecurity risks on a global basis. With sustained macroeconomic pressure, the company may struggle to keep its operating expenses in check.
In the fourth quarter of 2023, the company reported a 13.4% rise in the cost of products sold and an 18.6% rise in selling, general and administrative expenses. Adjusted operating margin contracted 22 basis points (bps) to 22.1% in the reported quarter.

With Boston Scientific recording 40% of its sales from the international market, it remains highly exposed to currency fluctuations. Unfavorable currency movements have been a major dampener over the last few quarters, as in the case of other important MedTech players, too.
In 2023, the company faced an approximate 80 bps headwind from foreign exchange on revenues.

Further, the presence of a large number of players has made the medical devices market highly competitive. The company operates in several markets, including cardiovascular, CRM, endosurgery and neuromodulation, where it faces competition from large, well-capitalized companies such as Johnson & Johnson, Abbott, Medtronic, Stryker, Smith & Nephew and Edwards Lifesciences, apart from several other smaller companies.

Boston Scientific Corporation Price

Boston Scientific Corporation price | Boston Scientific Corporation Quote

On a positive note, Boston Scientific has been continuing with its expansion of operations across different geographies outside the United States. Within its international regions, the company is putting additional efforts to expand its foothold in emerging markets (which are defined as all countries except the United States, Western and Central Europe, Japan, Australia, New Zealand and Canada). These hold strong growth potential based on their economic conditions, healthcare sectors and global capabilities.

We are also impressed with Boston Scientific's recent acquisitions that have added numerous products (though many are under development) with immense potential. This, in turn, should help boost the top line in the long term.
In December 2023, Boston Scientific announced its plans to acquire Axonics, a medical technology company that offers innovative devices to treat urinary and bowel dysfunction. With this $3.7-billion acquisition, the company expects to expand its differentiated technologies portfolio within Urology.

Key Picks

Some better-ranked stocks from the broader medical space are Stryker Corporation SYK, Cencora, Inc. COR and Cardinal Health CAH.

Stryker, carrying a Zacks Rank #2 (Buy), reported fourth-quarter 2023 adjusted EPS of $3.46, beating the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%.

Stryker has an estimated earnings growth rate of 11.5% for 2025 compared with the S&P 500's 9.9%. The company's earnings surpassed estimates in each of the trailing four quarters, the average being 5.1%.

Cencora, carrying a Zacks Rank #2, reported first-quarter fiscal 2024 adjusted EPS of $3.28, which beat the Zacks Consensus Estimate by 14.7%. Revenues of $72.3 billion outpaced the Zacks Consensus Estimate by 5.1%.

COR has an earnings yield of 5.75% compared with the industry's 1.85%. The company's earnings surpassed estimates in each of the trailing four quarters, the average being 6.7%.

Cardinal Health, carrying a Zacks Rank #2, reported second-quarter fiscal 2024 adjusted earnings of $1.82, which beat the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion improved 11.6% on a year-over-year basis and also topped the Zacks Consensus Estimate by 1.1%.

CAH has a long-term estimated earnings growth rate of 15.3% compared with the industry's 11.8% growth. The company's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%.

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