Should You Pick Boston Scientific Stock After A Solid Q4 And 13% Uptick This Year?

Boston Scientific (NYSE: BSX) reported its Q4 results last month, with revenues and earnings comfortably beating the street estimates. The company reported revenue of $3.7 billion and adjusted earnings of $0.55 per share, compared to the consensus estimates of $3.6 billion and $0.51, respectively.  BSX stock has seen a solid 13% rise this year, partly aided by robust Q4 results. However, after its recent run, we believe that BSX stock is fully valued. In this note, we discuss Boston Scientific’s stock performance, key takeaways from its recent results, and valuation.

BSX stock has seen extremely strong gains of 85% from levels of $35 in early January 2021 to around $65 now, vs. an increase of about 30% for the S&P 500 over this roughly three-year period. BSX is one of a handful of stocks that have increased their value in each of the last 3 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, and 25% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that BSX underperformed the S&P in 2021.

In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Health Care sector including LLY, UNH, and JNJ, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could BSX face a similar situation as it did in 2021 and underperform the S&P over the next 12 months – or will it see a strong jump? From a valuation perspective, BSX stock looks like it is appropriately priced. We estimate Boston Scientific’s Valuation to be $64 per share, slightly below its current levels of $66. This represents a 28x P/E multiple for BSX based on adjusted earnings expectation of $2.26 per share in 2024. The 28x P/E ratio also aligns with the average over the last five years.

Boston Scientific’s revenue of $3.7 billion in Q4 was up 15% y-o-y, primarily due to 14% growth in the Cardiovascular segment and an 11% rise in MedSurg sales. Boston Scientific’s acquisition of Apollo Endosurgery, Relievant Medsystems, and a majority stake in Acotec has bolstered its top-line growth, a trend expected to continue.

Boston Scientific’s operating margin expanded 90 bps to 26.6% in Q4. Higher revenues and margin expansion resulted in adjusted earnings of $0.55 per share, up 22% y-o-y. Looking forward, Boston Scientific expects its sales to rise by 8.5% to 9.5% and earnings to be in the range of $2.23 and $2.27 on a per-share and adjusted basis.

The company will likely continue to benefit from new product launches, including Agent, Rezum, POLARx FIT, Vercise, and XL valves. Furthermore, its recent acquisitions will further bolster its top-line growth. Its majority stake in Acotec will likely aid its future sales growth in China. That said, much of the positives appear to be priced in for Boston Scientific. It is already trading at 29x forward earnings, compared to the average of 28x seen over the last five years.

While BSX stock looks like it is appropriately priced, it is helpful to see how Boston Scientific’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 2/21/2024
[2] Cumulative total returns since the end of 2016

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