Is Boston Scientific a lucrative pharma investment?

Boston Scientific fell after missing earnings expectations. Is it a good buy now?

By Benzinga Oct 21, 2011 5:51PM

By Abe Raymond, Benzinga Staff Writer


There have to be at least 1,000 scientists living in the metro-Boston area that specialize in the life sciences and health care. With institutions all over the place, including universities like Harvard and MIT, Boston is in shortage of brilliant, cutting-edge scientists.

 

One famous global company that operates out of Boston is Boston Scientific (BSX). Boston Scientific develops and manufactures medical technology applicable to a range of diseases, including various cancers and heart conditions. The company's stock has lost almost 30% in value, but could it still be valuable?


Over the last several quarters, Boston Scientific's revenues have been wavering between $1.9 billion and $2 billion. Its operating expenses have also been approximately $1 billion during the same time period. After all expenses, 2011 has been a slow year for the company. In the first quarter, its net income dropped to $46 million, from $236 million from the quarter before. Most recently, it reported $146 million in net income, so there is still some growth.


Boston Scientific's cash position has also dropped over the last several quarters. The primary reason it has been "bleeding" cash is because the firm has been diligently paying off its debt, with coupon and interest payments increasing over time. Considering this, it may not be the most negative thing that the company's cash reserves are dwindling. Other assets, including receivables, inventories, and property, plant, and equipment have remained fairly stable. Overall, assets have decreased slightly over the last several quarters.


On the flip-side, Boston Scientific's debt has been significantly reduced, from $254 million in short-term debt to $4 million in the last quarter. Non-current liabilities also contracted in this period. Shareholders' equity increased as retained earnings and paid-in capital marginally increased. Overall, Boston Scientific's balance sheet appears to be improving as overall markets are trying to stabilize, as well.


On Thursday, October 20, Boston Scientific reported that it beat Q3 EPS estimates ($0.15 versus $0.09) while it missed revenue estimates ($1.87 billion versus $1.91 billion). The stock dropped a few percent as a result of the news. This may mean that the stock could continue to drop over time, but it may also present a buying opportunity. Investors need to look at all the earnings information to determine if Boston Scientific is a good long-term investment.


At the time of this article, Boston Scientific was trading at $5.42, down about 28.5% for the year.


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