Boston Scientific May Now Have The Strongest Pipeline In Company History

The firm initiated coverage of Boston Scientific with a Buy rating and a Street-high price target of $36 for the shares.

Analyst Jason Mills said the company is primed to deliver top- and bottom-line growth above its peer group over the next few years, given its compelling portfolio of differentiated products.

The products include Watchman, LAAC, S-ICD, Synergy DES and Lotus/Acurate TAVR, while the company also offers several differentiated technologies in its dominant Med-Surg business.

The analyst thinks the stock will outperform large-cap med-tech peers over the next three years through three drivers, which fundamentally comprise his bullish thesis.

1. Boston Scientific will deliver faster organic growth versus large-cap med-tech peer group. Canaccord Genuity estimates organic revenue growth of 7.8 percent through 2020 compared to 7 percent for large-cap peers.
2. The company will deliver operating margin expansion, suggesting faster earnings per share growth versus peer group through 2018, at least.
3. The firm expects the company to leverage a relatively unencumbered balance sheet in 2018-2021, allowing the company to consummate deals capable of augmenting growth and margins beyond organic means.

The firm said the company would spend about 90 percent of the $6.6 billion in free cash flow it estimates for the 2018-2020 timeframe, on M&A or returning cash to shareholders compared to 17 percent in the 2015-2017 timeframe.