Boston Scientific Corp (BSX) is gearing up with an array of cost-cutting measures as the U.S. medical device maker expects the coronavirus impact to be more “significant” in the second quarter than in the previous three months due to delayed surgeries.
The device maker told investors that although business was in line with expectations in the first two months of the year, in March procedural volumes significantly declined, as COVID-19 reached a global pandemic level. As a result, the company now expects first quarter revenue growth to be flat to up slightly versus the prior year period, and an organic revenue decline of about 2% to 3%.
“As healthcare systems respond to the increasing demands of managing COVID-19, emergent procedures need to be prioritized to help enable increased hospital capacity, and therefore elective procedures are being delayed,” said Mike Mahoney, chairman and chief executive officer at Boston Scientific. “While we expect this to negatively impact short-term performance, we continue to believe in the excellent, long-term fundamentals of our company and will continue to manage through these challenges with strategic focus.”
Four-star analyst Amit Hazan at Goldman Sachs yesterday upgraded Boston Scientific to Buy from Neutral, citing the stock’s “material” underperformance year-to-date and “relative confidence” in procedure volumes returning for cardiology more quickly than for other peers. Boston Scientific’s shares plunged over 30% this year.
Overall, other analysts agree with Goldman’s bullish outlook on Boston Scientific as 12 have a Buy recommendation and 1 has a Hold, adding up to a Strong Buy consensus rating. The $46.15 average price target means investors could be taking home a 53% yield in the next 12 months. (See Boston Scientific stock analysis on TipRanks)
To cope with expectations of a worsening revenue outlook in the second quarter, Boston Scientific has cut spending and implemented precautionary measures to ensure business continuity in its supply chain and manufacturing facilities. The company announced salary reductions of its chief executive officer, board of directors and executive committee members, and of work week schedules for employees.
Boston Scientific is scheduled to report its financial results on April 29, 2020.
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