Massachusetts-based Boston Scientific Corporation (BSX) holds significant appeal for healthcare investors, thanks to its extensive array of specialized medical devices and products, including a broad range of implantable devices such as pacemakers, as well as essential products like catheters.
Commanding a large market cap of $123.6 billion, BSX operates in the traditionally defensive healthcare industry, operating in specialized segments that include Cardiovascular, Rhythm and Neuro, and MedSurg. As the company's leadership shifts its focus toward entering and expanding in fast-growing areas such as prostate health and therapeutic oncology to address the needs of an aging population, Boston Scientific looks strategically positioned for sustained growth.
Boston Scientific stock has been on a meteoric rise this year, gaining more than 45% year-to-date. BSX has easily outperformed the iShares US Medical Devices ETF (IHI), up 8.6% on the year, and the broader S&P 500 Index ($SPX), which has advanced just over 20% in 2024.
However, Boston Scientific shares were volatile last week, as investors weighed a Q3 earnings beat against a disappointing update on the FARAPULSE trial.
Boston Scientific Beats on Q3 Earnings
BSX's recent price action has been supported by its impressive financial performance. In its Q3 earnings report last Wednesday, BSX reported a 14% increase in revenue to $4.21 billion, which surpassed consensus estimates. Earnings arrived at $469 million, or $0.63 per share on an adjusted basis, which also comfortably topped Wall Street's forecast.
The Cardiovascular and MedSurg segments reported revenue growth of 25% and 10.3% during Q3 2024, respectively.
Free cash flow for the third quarter was $822 million, and BSX ended the period with $2.5 billion of cash on hand. The company doesn't pay a dividend, and its capital allocation priorities are “strategic tuck-in M&A followed by annual share repurchases to offset dilution from employee stock grants,” per management.
During Q3, the company achieved significant milestones by receiving multiple regulatory approvals from the FDA, including the FARAWAVE NAV Ablation Catheter, and concluded the acquisition of Silk Road Medical.
"We continue to gain momentum driven by our product pipeline, clinical evidence and commercial execution that position us well for the long term," noted Mike Mahoney, Chairman and CEO of Boston Scientific, in a statement accompanying the release.
For the current quarter, Boston Scientific expects to report adjusted EPS of $0.64 to $0.66. Management projects revenue of $16.6 billion for the full year 2024, which represents an increase of 16.5% YoY. On an adjusted basis, they are expecting a full-year profit of $2.46 per share, at the midpoint. BSX backed its guidance for full-year free cash flow in excess of $2 billion.
However, on the conference call, Mahoney's comments on the FARAPULSE trial gave investors pause.
“As we have neared the end of this enrollment, we have elected to temporarily pause the trial to assess a few unanticipated observations. It is our intention to resume enrollment in the near term,” said the exec, who added, “Based on the totality of clinical evidence and commercial real-world experience, we remain extremely confident in the unique performance of FARAPULSE."
What's the Analyst Forecast for BSX Stock?
Following the Q3 earnings results, Stifel backed its “buy” rating and $100 price target on BSX, even as investors sold the FARAPULSE news. Arguing that Boston Scientific looks “positioned for another excellent growth year in 2025,” Stifel wrote that the negative reaction was a potential buying opportunity for investors.
Overall, BSX stock has a consensus "strong buy" rating from Wall Street, based on 28 analysts in coverage. Of these, 23 back a "strong buy," 3 have a "hold" rating, and there are zero "sell" ratings on the stock.
The average 12-month price target of $97.66 indicates an expected 15.8% upside potential from current prices.
Looking ahead, analysts are targeting EPS growth to $3.15 per share for BSX by fiscal year 2026. Valued at nearly 27 times forward earnings, the stock is currently priced at a premium - suggesting that value-minded investors may want to refrain from adding new positions at the current multiple.
On the date of publication, Nauman Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
