The ratings agency said it believes BSX stock is less risky now that the Natick, Mass.-based medical device giant has reduced its debt load and introduced new products into its pipeline, according to Moody’s analyst Diana Lee.
Moody’s upgraded BSX’s senior unsecured debt rating to "Baa3" from "Ba1," setting a "stable" outlook and removing its corporate family, probability of default and speculative-grade liquidity ratings.
"The stable outlook reflects Moody’s expectation that newly introduced [drug-eluting stent] and [cardiac rhythm management] products will help reverse recent market share losses and that, even as a new CEO transitions later this year, the company will not engage in large debt financed acquisitions or buyback initiatives. The outlook also reflects Moody’s belief that free cash flow to debt will be sustained around 20% and debt/EBITDA will be sustained at levels well below 3.0 times," according to a press release. "If Boston Scientific can improve market share in existing mature businesses while becoming competitive in newer technologies and continue to internally fund acquisitions and buybacks, the ratings could be upgraded."
"Boston Scientific’s commitment to lower leverage and cost-cutting initiatives should provide it with sufficient cushion to withstand ongoing pressures in its core markets," Lee added in prepared remarks. "Furthermore, patent litigation risk continues to wind down, as recent developments appear to weigh in Boston Scientific’s favor."
"We are pleased to achieve an investment-grade rating from all 3 major credit rating agencies, recognizing the strength of our balance sheet, strong cash flow, recent drug-eluting stent and cardiac rhythm management product launches, as well as other tangible signs of the progress we are making," BSX CFO Jeff Capello said in prepared remarks. "We remain committed to a strong capital structure and improved profitability, while retaining the capacity to fund investments in our Priority Growth Initiatives and other programs to increase shareholder value.
BSX shares ticked up 0.3% to $5.95 today as of about 1:24, after briefly topping the $6-per-share mark this morning.
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- Becton, Dickinson (NYSE:BDX): Goldman Sachs maintains "neutral" rating.
- Edwards Lifesciences (NYSE:EW): Leerink Swann maintains "outperform" rating.
- Insulet (NSDQ:PODD): Brean Murray sets "buy" rating, $24 price target; Jefferies maintains "buy" rating, raises price target to $24 from $21.
- Medtronic (NYSE:MDT): Citigroup raises price target from $45 to $48, maintains "buy" rating; Wells Fargo & Co. upgrades from "market perform" to "outperform;" Barclays Capital raises price target from $38 to $41, sets "equal weight" rating.
- Palomar Medical (NSDQ:PMTI): Needham & Co. reiterates "buy" rating, $20 price target, lowers FY12 EPS estimate from $0.16 to $0.10, lowers FY12 revs from $100.5 million to $85.9 million.
- Syneron Medical (NSDQ:ELOS): Needham & Co. reiterates "buy," $19 price target, raises 2012 revenue growth rate to 16% from 12%.
- Thoratec (NSDQ:THOR): Leerink Swann maintains “outperform” rating, $45 price target; Piper Jaffray upgrades from "neutral" to "overweight," raises price target to $37 from $33; ThinkEquity initiates coverage at "buy," $50 price target; Canaccord Genuity cuts price target $31, reiterates "hold" rating.