9 Stocks to Buy Before Their Earnings Reports

Boston Scientific stock has risen 7% this year. (Dreamstime)

Key Points

• Evercore strategists identified stocks that can rise on strong earnings.
• The identified stocks, including Adobe and Cisco, often have high short interest, suggesting potential for a short squeeze if strong earnings reports materialize.
• Boston Scientific is highlighted as an example, with 20 million shares sold short and a 1.3% short interest, indicating a potential buying opportunity ahead of its October 22 earnings report.

Finding stocks that can rise on the back of strong earnings is becoming difficult. Evercore strategists screened for the few that can.

Right now, stocks are so expensive it might be hard for them to rise much further—even in the case of better-than-expected earnings. The S&P 500 trades at almost 23 times the next 12 months’ expected earnings, near the highest multiple in the past five years. That means stock prices have already reflected much of companies’ future profits. When that happens, even slightly higher earnings versus estimates can’t always fuel stocks significantly higher.

But there are stocks that can still get an earnings boost. It just takes a little digging.

To find such stocks, Evercore screened for companies that have produced higher sales and earnings than analysts had forecast in all of the past eight quarters. The screen also required that stocks trade at lower price-to-earnings multiples versus their recent histories—meaning they could have room to rise if earnings are surprisingly strong.

Stocks on the list include Adobe, Okta, Cisco , chip maker Qorvo, General Motors , medical device maker Stryker, Zoom Communications , and its competitor RingCentral.

Many of these stocks also have high short interests versus their histories. That means a larger percentage of their shares have been sold short—a bet that they will fall—than is normal. The silver lining: The level of short interest likely won’t rise much further—and those who have shorted those stocks will have to buy them back within months at most. And they’ll certainly buy the shares back on sign of strength—such as a stellar earnings report.

A good example from the screen is Boston Scientific , a medical product maker focusing on devices for heart disease and related procedures. Its stock trades at just under 29 times earnings, down from about 36 times earlier this year**.** To reach that valuation**,** the stock had outperformed the S&P 500 for years on the back of steadily growing sales and earnings—thanks to the growing number of heart procedures (changes in the economy typically don’t affect hospitals’ demand for products.) But after hitting that higher multiple, the stock eventually succumbed to selling pressure, falling 10% since early February.

Now, nearly 20 million shares of Boston Scientific are sold short, up from around 10 million in January. That could present a buying opportunity, especially with the stock’s lower multiple. There likely won’t be much more short selling, considering that short interest of 1.3% of shares outstanding is almost the highest percentage in the past three years, according to FactSet. Short sellers will have to buy shares back if they believe the stock will start rising, which could certainly happen after its next earnings report.

Boston Scientific usually surpasses estimates—and it reports its third-quarter results on Oct. 22 before the market opens. Analysts expect quarterly sales of $4.96 billion and earnings per share of 71 cents.

Those numbers are beatable, especially because management guided for $20 billion of full-year 2025 sales. That implies that third- and fourth- quarter sales would have to average out around $5.1 billion.

Expect another beat for this company—and stock gains afterward. The best news of all: Investors who don’t wish to bet on Boston Scientific can pick from the list above.

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