When you're as beaten-down as Boston Scientific (NYSE: BSX), you seemingly have nowhere to go but up.
Well, I guess there's also bankruptcy, but the beleaguered medical device maker seems far from that -- at least for now.
Shares seemed to be headed higher after hours last night, following the company's report that it had quadrupled analysts' earnings estimates. Of course, Wall Street only expected a measly $0.03 per share, and Boston Scientific's adjusted earnings of $0.12 per share were still well off the $0.20 it managed this time last year.
As expected, the recall of some of the company's heart defibrillators took its toll on the quarter. Boston Scientific resumed shipping during the quarter, but the damage was done. U.S. sales of defibrillators were down nearly 25%, giving Medtronic (NYSE: MDT) and St. Jude Medical (NYSE: STJ) a chance to grab some of that market.
Boston Scientific's other major segment, drug-eluting stents, hasn't had any recalls that I know of, but it's not exactly firing on all cylinders, either. Sales of the tiny mesh devices were down 13%, as Abbott Labs' (NYSE: ABT) Xience V continues to make a strong push into the market formerly dominated by Boston Scientific and Johnson & Johnson (NYSE: JNJ).
Better-than-expected earnings from companies on the ropes can be a conundrum for investors. On the surface, they merit an increase in value, but only if the company can maintain the momentum.
In this instance, I'm from Missouri, and I want the company to "show me" first. I suggest Fools wait to buy shares until Boston Scientific registers a couple of quarters of beating expectations. Investors seem to agree; the company's share price retreated following last night's bump, falling as much as 7% today. By waiting, you'll miss a potential move up -- there's certainly more room in that direction for Boston Scientific's shares -- but you'll avoid the risk of further deterioration that seems possible, given the company's history.
Todd Wenning covers the other end of the spectrum, selling even though it’s a quality stock.
