Think about this for a moment: Boston Scientific's ($BSX) stock closed July 25 at $10.83 per share, more than 100% higher than its $5.22 closing price the year before and a 12% gain over the previous day's trading. Mass High Tech/The Boston Business Journal noted the stock price hit its highest level in four years. That's an astounding turnaround for a company that has been mired for some time now in revenue decline, massive M&A-related debt and layoffs. But the question remains whether the company can maintain that momentum for the rest of 2013 and beyond.
Boston Scientific's gains appeared to hold steady in trading early on July 26. If that continues, it would indicate that investors remain elated about the company's $1.8 billion in net sales and $130 million in net income for the 2013 second quarter, which surpassed both analysts' predictions and the company's own guidance. But more than that, it could reflect the longer-term return of investor confidence in the company.
While net sales dipped 1% compared to the same period in 2012, experts had expected a greater decline. Certain key areas such as interventional cardiology and cardiac rhythm management continued to show income declines based on pricing pressures and fewer procedures, but Boston Scientific said it expects those pressures to lessen. And the company's success in boosting endoscopy and neuromodulation revenue has created perceptions that Boston Scientific's revenue will resume growing soon.
Some see Boston Scientific as recovering after a long, dark period of layoffs, reorganization and then strategic M&A deals over the last two years designed to restore revenue growth by building new business lines. But the company still has a lot to prove, Leerink Swann analyst Danielle Antalffy told Barron's.
"For the stock to move higher still, the accelerating organic growth trend and positive operating leverage demonstrated in the second quarter will have to be sustainable from here," Barron's quotes Antalffy as saying.
While there are no guarantees, management promises more improvement. Based on the second quarter results, the company boosted its earnings-per-share prediction for 2013 from 67 cents to 71 cents, up from an initial guidance of 65 cents to 70 cents.
Still, The Motley Fool's Brian Pacampara urges investor caution before buying in.
"I'd wait for some of the turnaround excitement to fade before buying into that bullishness," he wrote.