Comparative studies in the financial markets are rapidly proving that there’s no business like healthcare. Year-to-date, the main industry exchange-traded fund Health Care SPDR (XLV) is up nearly 5%, while the broader SPDR S&P 500 ETF Trust (SPY) is only in the green by a little less than a percent.
Of course, virtually all sectors were deeply affected by last month’s global volatility and its ensuing consolidation phase, but healthcare providers and medical equipment companies rode the storm better than others.
Boston Scientific (BSX) is a prime example of the outperformance within the sector. After going through a rough patch in the immediate years following the onset of the Great Recession, BSX stock accrued positive returns between 2012 and 2014. This year, Boston Scientific shares are on pace for a particularly strong showing, with BSX up nearly 30% YTD.
But the medical equipment provider’s achievements aren’t solely reduced to trading activities. Over the past two-and-a-half years, Boston Scientific scored 11 consecutive earnings reports that either met or exceeded Wall Street consensus estimates.
Results for the most recent second quarter of fiscal year 2015 report — released on July 23 — were considered contextually impressive, given cut-throat competition and unfavorable currency dynamics.
Despite the challenges, earnings for BSX stock were up a penny over the forecast, buoyed by Boston Scientific’s inroads into key Asian markets.
However, BSX isn’t without its detractors. For one thing, the healthcare company hasn’t posted annual profits since the close of FY2011. It’s also carrying a rapidly rising debt level with which some investors may not be comfortable, as this may hinder Boston Scientific’s global ambitions. On a more industry specific note, sales from the company’s pacing and defibrillators division — BSX’s bread and butter — is less than desired.
Furthermore, against BSX stock’s peak price this year of $18.51 — recorded on June 1 — shares are down 7%. While this may not sound like much given what Boston Scientific has accomplished in the markets, upside momentum for BSX stock has been stubbornly capped by a declining resistance line, which happens to coincide with its 50-day moving average.
And despite jumping up nearly 9% since bottoming in late August under the broad market correction, BSX stock hasn’t quite moved up to the same level before the troubles began — somewhat strange for an otherwise solid company in a demand-rich industry.
Boston Scientific, nevertheless, enjoys widespread popularity within Wall Street’s inner circle, with a strong majority of analysts maintaining a bullish perspective towards BSX stock. The median price target is $21, or a 24% premium against current market value.
Based on management’s expansion strategy, overall technical performance and a fundamentally strong healthcare environment, BSX stock should be a good pickup, especially if it happens to meet short-term volatility.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
