NEW YORK (TheStreet) -- Boston Scientific (BSX) - Get Boston Scientific Corporation Report shares are down 0.71% to $16.77 in early market trading on Monday after the medical device company agreed to purchase Endo International's (ENDP) - Get Endo International Plc Report American Medical Systems men's and prostate health business for $1.65 billion.
The decline reverses the 0.65% gains the stock was experiencing in pre-market trading today following the announcement.
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AMS men's and prostate health business had sales of $400 million in 2014. The deal, which is expected to close in the third quarter of this year, does not include the company's women's health division.
The acquisition is for $1.6 billion in cash with Endo eligible to receive an additional $50 million bonus if Boston Scientific reaches certain product revenue milestones in the men's health and prostate health businesses in 2016.
The sale allows Endo to continue to streamline its operations and focus on its core pharmaceutical business.
"This transaction provides us with greater financial flexibility and better positions the Company to take advantage of value-creating M&A opportunities for our pharmaceuticals businesses. As a result of the divestiture, we expect to realize an increase in our revenue growth rate, an improvement in our operating margin profile and a decrease in our overall effective tax rate," said Endo CEO Rajiv De Silva.
Endo shares are up 3.88% to $88.92 in early market trading on Monday.
TheStreet Ratings team rates BOSTON SCIENTIFIC CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate BOSTON SCIENTIFIC CORP (BSX) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- BSX's revenue growth has slightly outpaced the industry average of 0.9%. Since the same quarter one year prior, revenues slightly increased by 2.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.62, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.79 is somewhat weak and could be cause for future problems.
- Compared to its closing price of one year ago, BSX's share price has jumped by 26.08%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- BOSTON SCIENTIFIC CORP's earnings per share declined by 25.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BOSTON SCIENTIFIC CORP turned its bottom line around by earning $0.19 versus -$0.08 in the prior year. This year, the market expects an improvement in earnings ($0.91 versus $0.19).
- The gross profit margin for BOSTON SCIENTIFIC CORP is rather high; currently it is at 64.18%. Regardless of BSX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BSX's net profit margin of 4.61% is significantly lower than the industry average.
- You can view the full analysis from the report here: BSX Ratings Report