Fitch boosts Boston Scientific’s Long-Term IDR to ’A-’, maintains stable outlook

Investing.com -- On Wednesday, Fitch Ratings upgraded Boston Scientific Corporation’s (NASDAQ:NYSE:BSX) Long-Term Issuer Default Rating (IDR) from ’BBB+’ to ’A-’, while maintaining a stable outlook. The rating agency also confirmed the company’s Short-Term IDR at ’F1’.

This upgrade is a reflection of BSX’s robust operational performance since 2020, substantial enhancement in Free Cash Flow (FCF) due to reductions in litigation payments, accelerated revenue growth, and adherence to a conservative financial policy. Fitch appreciates BSX’s exceptional innovation profile, resulting in significant product launches that drove substantial revenue growth and boosted Fitch’s confidence in the company’s ability to maintain above-average growth over the rating horizon.

Fitch predicts that BSX will continue to prioritize innovation through higher-than-industry-average research and development (R&D) spending and active tuck-in acquisitions, while maintaining its publicly stated gross leverage target of 2.25x-2.5x.

In 2024, BSX generated $16.7 billion in revenue, a 17.6% increase from the previous year. This growth exceeded both the company’s initial 9% guidance and Fitch’s 8.4% expectation. This success was primarily driven by the successful commercialization of Farapulse, the continued momentum of Watchman devices, and contributions from inorganic additions.

BSX has a well-established merger and acquisition (M&A) strategy. Over the past 14 years, BSX has allocated over $22 billion for tuck-in M&As across all business units. Most of the acquired assets were innovative or unique technologies in their early commercialization stages, synergistic with BSX’s product portfolio, and upon integration with BSX’s existing operations, drove growth for the company.

Fitch expects BSX’s EBITDA leverage to be 2.4x at the end of 2024 and remain around or below this level through 2027. This forecast assumes $12 billion in partially debt-financed acquisitions. Fitch expects share repurchases to become a more meaningful use of FCF than historically.

FCF grew by over 50% to $2.6 billion in 2024 from $1.7 billion in 2023, driven by strong working capital management and growth in operating income. Fitch anticipates FCF to improve to at least $3 billion annually.

BSX continues to focus on its high-growth markets, which currently constitute roughly 50% of revenue and contribute high-single to double-digit growth. BSX expects 60% of its revenue to be derived from high-growth markets and 25% from moderate-growth markets by 2026.

BSX is a large diversified medical device firm focusing on interventional cardiology, peripheral interventions, cardiac rhythm management, electrophysiology, endoscopy, urology, pelvic health and neuromodulation. The company provides physicians with innovative and less-invasive medical devices, which it develops through internal R&D, acquisitions or collaborations.

As of Dec. 31, 2024, BSX has solid liquidity with $414 million of cash on hand. BSX also maintains a $2.75 billion revolving credit facility due May 2029 and a $2.75 billion commercial paper program backed by the revolver. Fitch expects liquidity to be consistently supported by solid cash generation throughout the forecast period. Fitch assumes the acquisitions will be funded with incremental debt issuances.

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