Boston Scientific: Anemic -- For Now

By Gene G. Marcial

Boston Scientific (BSX ) is far from robust -- since its summer recall of 100,000 coronary stents and since its lowered fourth-quarter profit forecast. Analysts quickly cut estimates, driving shares down from 46 in May to 33.36 on Nov. 23.

Tired Blood
But John Maloney of M&R Capital Management, which owns stock, says that BSX -- a maker of surgical devices for cardiology, oncology, and urology -- is too undervalued to ignore. With its leadership in stents (70% of the market vs. 30% for Johnson & Johnson (JNJ )) and its "rich pipeline" of other products, BSX shouldn't be trading so low, he argues. "It is the cheapest in the medical-device group," he says, selling at only 15 times his 2005 profit estimate of $2.25 a share, and 13.6 times his $2.50 for 2006. His 12-to-18-month target: 50 -- or 20 times his 2006 estimate.

BSX may lose market share in stents, he says, as competition heats up, but it will remain No. 1. Non-stent products, such as tools for cardiac surgery, will offset any loss. Maloney sees sales of $5.5 billion in 2004, $6.2 billion in 2005, $7 billion in 2006, and $8 billion in 2007. Michael Weinstein of J.P. Morgan Securities (JPM ), who rates BSX "outperform," is confident of its "long-term prospects -- driven by a solid product pipeline."

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

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