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TheStreet Open House

Boston Scientific's Gains Can't Last

NEW YORK (TheStreet) -- After posting gains of more than 105% year-to-date, not only has the Street woken up to what Boston Scientific (BSX - Get Report) has become, but investors are beginning to place strong bets on what management will do in 2014. At the risk of sounding too pessimistic, we've been down this road before. And it's only led to a dead end.

While there are meaningful signs that management, in particular new CEO Mike Mahoney, has moved Boston Scientific past some of its problems, I can't ignore that this company has spent the past decade lingering in perpetual restructuring mode, leaving investors in limbo of what direction management will take next. Billions of dollars spent on acquisitions have produced little-to-no growth.

I will grant that the company is in a much better position today than it was prior to Mahoney's arrival. But I have to question if the stock's strong year-to-date performance is a true reflection of investors' confidence. I don't believe that Boston Scientific has done enough over the past three quarters to suggest that it can outperform in the next 12 to 18 months, which is what these share gains presume.

Although third-quarter results were moderately better than the company's prior quarters, they were still no better than in-line performance. I'm inclined to believe Boston Scientific's recent stock gains have been the result of a wave of better-than-expected earnings seen from other med-tech giants like Medtronic (MDT), St. Jude Medical (STJ) and Stryker (SYK).

I expect investors will disagree. But given the deficits this company has been working with and the length of time it's been proclaimed the "best turnaround candidate," it will take more than "in line" results to earn back my trust. In fairness, it was encouraging that management was able to produce 4% organic growth, which was not only better than St. Jude, but it more than doubled Johnson & Johnson's (JNJ) device business.

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