VALUATION HIGHLIGHTS
- Cardiovascular constitutes 39% of the Trefis price estimate for Boston Scientific's stock.
- Rhythm Management constitutes 32% of the Trefis price estimate for Boston Scientific's stock.
- MedSurg constitutes 29% of the Trefis price estimate for Boston Scientific's stock.
WHAT HAS CHANGED?
BSX Stock Performance In Recent Years
BSX is one of a handful of stocks that have increased their value in each of the last 4 years, but that still wasn't enough for it to consistently beat the market.
Returns for the stock were 18% in 2021, 9% in 2022, 25% in 2023, and 55% in 2024. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, 24% in 2023, and 23% in 2024 — indicating that BSX underperformed the S&P in 2021.
Q4 2024 Performance
Boston Scientific's revenues rose 22% (y-o-y) to $4.6 billion in Q4 2024, with revenue growth seen in all segments. While the Cardiovascular segment saw an 29% rise in sales, MedSurg sales were up 13%. The adjusted EPS came in at $0.70, 27% higher than the $0.55 figure reported in the prior-year quarter.
Spree of Acquisitions
Boston Scientific announced dozens of acquisitions over the recent years, including Bolt Medical, Intera Oncology, Cortex, Silk Road Medical, and Axonics among others. The company also holds a majority stake in Acotec, which is aiding its sales growth in China.
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
Below are key drivers of Boston Scientific's value that present opportunities for upside or downside to the current Trefis price estimate for the company's stock:
Interventional Cardiology
- Boston Scientific's Cardiovascular Revenue: This is the most important division and the biggest source of revenue for Boston Scientific. As the company continues to innovate its drug-eluting stent technology (DES) and its Transcatheter Aortic Valve Replacement (TAVR) system, we expect the company to retain its market share over our forecast period.
The Promus PREMIER stent has been gaining widespread acceptance. Meanwhile, the SYNERGY stent continues to perform strongly by representing more than 25% of the company's total European DES sales. Similarly, the product offerings of the company's structural heart business are expected to sustain its growing market share. The Lotus TAVR has been reporting impressive growth in the international market. Another product that could bolster revenue for the IC division is the Watchman device. As the segment is the largest revenue contributor and constitutes more than 40% of our price estimate, even a small out-performance with respect to our expectations will have a huge impact on the company's valuation.
MedSurg
- Boston Scientific's MedSurg Revenue: This division is the second-biggest revenue source for Boston Scientific. We forecast the company's market share to remain steady, resulting in moderate growth in revenue. The segment includes Women's Health, Urology, as well as the Endoscopy business. The segment revenues have been growing at a fast pace, and this trend is expected to continue in the coming years. Going ahead, if the company improves its market share significantly and the segment's revenue increases by an additional $2 billion by the end of our forecast period, there can be more than a 15% upside to our price estimate.
BUSINESS SUMMARY
Founded in 1979, The Boston Scientific Corporation develops, manufactures, and supplies medical devices across the world. These devices are primarily sold in the following areas of medicine - Interventional Cardiology, Cardiac Rhythm Management, Endoscopy, Peripheral Interventions, Urology/Women's Health, Neuromodulation, and Electrophysiology. The company's largest sources of revenue are sales of Interventional Cardiology and Cardiac Rhythm Management devices.
Boston Scientific supplies its devices in around 125 countries around the world, mainly the U.S., Europe, the Middle East, Japan, Canada, China, India, and Brazil. The company historically has been very acquisitive in order to strategically expand its operations and sales.
Its main competitors are Johnson & Johnson, Medtronic, and Abbott.
SOURCES OF VALUE
Interventional Cardiology, Endoscopy, and Cardiac Rhythm Management are the major sources of revenue for the company. Here's why:
Continuous innovation and product improvement
Coronary stents are implantable tubes that help in opening blocked arteries and ensuring smooth blood flow. These are the largest revenue driver for Boston Scientific, as it is the only company in the world to provide a two-drug platform. The company keeps launching improved versions of these stents to maintain its market leadership position. Continuous innovation and product improvement should allow Boston Scientific to maintain a healthy market share and increase its revenue base from the division, in our view.
KEY TRENDS
Launch of new products
Boston Scientific spends a significant portion of its revenues on research and development. As a result, it has been able to launch many self-manufactured products in the market. In the last few years, the company has launched a few new devices in its major segments. This has been fueling the top-line growth.
Healthcare reform could impact selling prices
Stringent healthcare regulations have implemented checks on the pricing structure of medical device companies, which could have a negative impact on global revenue growth.
