Boston Scientific is Thursday's IBD Stock Of The Day. Shares are forming a double-bottom base and approaching an early entry after a bullish first-quarter report.
The beat-and-raise earnings report along with a strong pipeline put Boston Scientific "in the top decile," Evercore ISI analyst Vijay Kumar said in a note to clients.
Needham analyst Mike Matson pointed to Farapulse and Watchman as the company's top two growth drivers.
Farapulse is a pulsed field ablation system. It uses high-voltage, short-duration electrical pulses to disrupt certain cells in the heart and treat a heart rhythm disorder called atrial fibrillation. Watchman is an implantable device that closes a specific part of the heart to prevent strokes in patients with a form of atrial fibrillation.
"BSX is checking all the boxes and sets the stage nicely for Jon Monson, who will take over the CFO role starting (in) June," Kumar said. Monson, senior vice president of investor relations, is succeeding outgoing Chief Financial Officer Dan Brennan. Brennan announced his retirement Wednesday.
On the stock market today, Boston Scientific rose 2.2% to close at 101.14. Shares are within striking distance of Wednesday's high at 102.37, which could be considered an early entry. But the stock is also forming a traditional double-bottom base with a buy point at 104.35, MarketSurge analysis shows.
It's important to note that the market remains risky and Investor's Business Daily continues to recommend 0%-20% exposure.
Boston Scientific Beats Earnings Views
Overall, Boston Scientific came in with $4.66 billion in first-quarter sales, growing 21% and beating calls for $4.57 billion, according to FactSet. Organically, sales climbed more than 18%. Adjusted earnings also topped projections at 75 cents a share, growing nearly 34%.
Sales of electrophysiology tools — which treat abnormal heart rhythms and includes Farapulse — grew 145% organically to $730 million. Analysts projected a significantly lower $647.4 million. U.S. sales grew 225%, Evercore's Kumar said. Watchman sales also climbed 24% to $425 million, above forecasts for $414.8 million. Watchman sales also accelerated in the U.S.
Boston Scientific raised its outlook for the year and now projects 12%-14% organic sales growth, up from its three-months-ago outlook for 10%-12%. On a strict, as-reported basis, the medtech player guided to 15%-17% growth. The company also expects adjusted earnings of $2.87 to $2.94 per share, up 7 cents at the midpoint.
"BSX is likely one of the few companies that can credibly raise Guide in this environment," Kumar said.
He kept his outperform rating and 110 price target on Boston Scientific stock.
Tariffs Will Squeeze Gross Margin
The outlook includes an expected $200 million impact from tariffs. Boston Scientific is trying to offset that through sales upside and reductions in discretionary spending. The company said it just opened a new site in Georgia and plans to expand its footprint in Minnesota.
But tariffs are expected to squeeze Boston Sci's adjusted gross margin. Farapulse and Watchman growth have helped bolster the margin, which was 71.5% in the first quarter. Three months ago, Boston said gross margin would improve this year. Now, it's expected to be in line with last year's. In 2024, gross margin was 70.3%.
Brennan, the CFO, said in February the company expected gross margin and research-and-development expenses would rise in 2025, with selling, general and administration costs going down. Now, the equation looks a little different, he told analysts on the late Wednesday earnings conference call.
"It just goes to flexibility, the agility and the winning spirit of the team when confronted with the $200 million headwind," he said. "So now, as we sit in April, gross margin is likely to go backwards. So, what do you do? You look to take some actions, again, discretionary actions for spending that we can eliminate and with no impact on the top line or long-term growth."
Highly Rated, IBD 50 Stock
Boston Scientific shares have risen almost 11% this year, as of Wednesday's close, widely outperforming a roughly 10.5% drop for the Medical-Products industry group. Shares rank second in the group, behind Pro-Dex, a contract manufacturer.
Boston Scientific ranks No. 38 on the IBD 50 list of elite growth stocks.
The stock has a nearly perfect IBD Digital Composite Rating of 98, putting it in the leading 2% of all stocks in terms of fundamental and technical performance. Boston Scientific also has a strong Relative Strength Rating of 90 out of a best-possible 99, reflecting its strong 12-month performance.
Notably, the medtech stock's relative strength line hit a new high on Thursday.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
