By Jacob Sonenshine

Boston Scientific stock, typically a strong performer, has been running in place for the last six months. Its second-quarter earnings, due Wednesday, could reignite its rally.

Shares of the medical-devices company have fallen 3%, to $103.07, over the past six months, while the S&P 500 has risen 2.5%. It's a rare pause for Boston Scientific, which has returned 23% annualized over the past five years, including reinvested dividends, seven points better than the index's 16% return.

Tariffs haven't helped, while a late May announcement that it will discontinue sales of its Acurate transcatheter aortic valve replacement hurt a bit. The company wants to direct its spending away from that product and into more-promising ones.

Boston Scientific has a long track record of strong growth. Analysts expect sales to have grown by 14.5% annually from 2020 through this year, driven by strength in its cardiovascular segment, which makes products that treat coronary artery disease and aortic valve conditions. In the first quarter, the unit grew 26% year over year to $3.09 billion, helping lift total sales by 21% to $4.66 billion. That growth should continue as new devices, such as those from Apple and Medtronic, help people track their heart health.

Boston Scientific has spent billions over the past decade to acquire dozens of smaller companies to bring the newest and most innovative products in house. That has enabled it to create a larger group of products -- it includes everything from defibrillators to pacemakers -- for medical professionals, helping it sell more to each customer and gain market share.

"M&A can also create a 'portfolio effect' where BSX can make themselves essential/irreplaceable in a key market," says Jefferies analyst Matt Taylor.

That dynamic, and the growth it will spur, should continue in the second quarter. Analysts expect Boston Scientific to report a profit of 73 cents a share on sales of $4.89 billion, up 19% from the same quarter one year ago. Don't be surprised if it tops those sales estimates -- as it has in 17 of the past 20 quarters, with an average result 3.1% above estimates, according to our calculations of FactSet data. "Guidance -- consistent with [the] past -- embeds conservatism and sets up for beat and raises," writes Truist Securities' Richard Newitter.

Earnings are "only" expected to grow by 18% in the second quarter, as they feel the pinch from higher interest expenses. Wall Street, however, expects the pace to rise to 21% over the next four years as those expenses flatten out, and profit margins creep higher as sales growth outpaces expenses. "Operating leverage should drive double-digit earnings growth," writes Needham analyst Mike Matson.

That outlook, if next week's release upholds it, should push the stock higher. It tends to respond well to the company's usually strong presentations. Shares have gained as much as 6.2% in 13 of the past 20 trading days after earnings. This time around should be no different.

While the stock trades at 33 times earnings, rising earnings would make the valuation look less demanding. What's more, it trades at only 1.5 times expected earnings growth, versus nearly two times for the S&P 500.

Earnings will pump the stock higher.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

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July 17, 2025 04:30 ET (08:30 GMT)

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