Boston Scientific (BSX - option chain) stock is trading lower today the company reached an agreement with Johnson & Johnson (JNJ) to settle three patent disputes. Under the deal, BSX will pay JNJ $1.725 billion. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on BSX.

This morning, BSX opened at $8.48. So far today the stock has hit a high of $8.83 and a low of $8.24. As of 11:50, BSX is trading at $8.47, down 16 cents (-1.8%). The chart for BSX looks bullish and S&P gives BSX a positive 4 STARS (out of 5) buy ranking.

Medtronic (NYSE: MDT), a manufacturer of a whole host of medical devices involved with the management of diabetes and cardiovascular disease, released its Q1 data on Tuesday. Revenues increased 6%, and adjusted earnings per share came in at 79 cents (some of the adjustments were related to restructuring and litigation issues).

The company was able to grow the adjusted-per-share bottom line by 10%. In addition, according to Reuters, Medtronic beat estimates by a penny. Shareholders should keep in mind, however, that the quarter benefited from an extra week.

Boston Scientific (NYSE: BSX), an expert in medical devices and a colleague of Johnson & Johnson (NYSE: JNJ), reported earnings for the second quarter on Monday after the closing bell. Wall Street liked the results. Shares of the company were bid higher by 5.8% in the after-hours session.

Net sales increased 7%. On an adjusted basis, Boston Scientific made 20 cents per share. According to Earnings.com, the business was supposed to bring in only 13 cents per share. Thus, management did a superb job of beating the analysts at their precious game. Unfortunately, Boston Scientific made the same amount of adjusted profit in the year-ago period, so there wasn't any growth on the bottom line.

Analyst upgrades:

• Jefferies upgraded Aruba Networks (NASDAQ: ARUN) to Buy from Hold following the company's Q3 results to reflect improved visibility. The firm raised its target price to $6.50 from $3.
• Citigroup upgraded Mosaic (NYSE: MOS) and Potash (NYSE: POT) to Buy from Hold and Agrium (NYSE: AGU) to Hold from Sell as it believes stronger grain fundamentals more than offset China contract risk. The firm raised its target on Mosaic to $72 from $48, on Potash to $145 from $83 and on Agrium to $55 from $36.
• Fulton Financial (NASDAQ: FULT) Was upgraded to Market Perform from Underperform at Keefe Bruyette.
• Rio Tinto (NYSE: RTP) was raised to Neutral from Sell at Goldman.
• Noble Corp. (NYSE: NE) was upgraded at Deutsche Bank to Buy from Hold.

Abbott Laboratories (NYSE: ABT - option chain) shares are higher today despite the surrounding market meltdown after a study released over the weekend showed the company's Xience stent showed significant safety advantages over competitor Boston Scientific's (NYSE: BSX) Taxus stent. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on ABT.

ABT opened this morning at $46.69. So far today the stock has hit a low of $46.65 and a high of $47.90. As of 11:35, ABT is trading at $47.73, up $1.13 (2.4%). The chart for ABT looks bullish and S&P gives ABT a positive 5 STARS (out of 5) strong buy ranking.

Abbott Laboratories (NYSE: ABT) got approval for its new drug-coated stent. The products are used to open clogged arteries, often in the place of by-pass surgery. The field has been dominated by deeply troubled medical device company Boston Scientific (NYSE: BSX). It looks that the weakened company is in for much more pain.

According to The Wall Street Journal, ABT "received regulatory approval for its Xience V drug-coated stent, which is expected to be the top seller in the roughly $2 billion U.S. market because it appears to be more effective than rival devices." Boston Scientific will sell the new Abbott product, but with 40% of the revenue going to its rival, it is hard to see how that is a good deal.

BSX has been beaten by competition at almost every turn. It took on tremendous debt when it bought medical device company Guidant. It faced trouble when some Guidant products hit quality control issues. Boston Scientific stents came under criticism a year ago, when medical research questioned how effective they were.

BSX traded at almost $45 in 2004. It is now at about $12. With new competition and a bad balance sheet, that is not likely to change much.

Douglas A. McIntyre is an editor at 247wallst.com.

Recent data suggests that America's largest industrial companies are piling up cash. The New York Times reports: "According to S.& P., the total cash held by companies in its industrial index exceeded $600 billion in February, up from about $203 billion in 1998."

That is good news if the money does something other than sit in the bank. A number of very large companies like Google (NASDAQ: GOOG) don't need anywhere near the tons of greenbacks in their accounts and they add more every quarter.

The money probably has two potential uses. One is to buy other companies -- as the market falls, there are going to be more deals at lower prices. Of course, many deals don't work. Some of these will fail to find economies of scale and lead to write-offs like the Boston Scientific (NYSE: BSX) buyout of Guidant. Everyone lost as the BSX shares fell apart.

The second option is that companies could just do the simple thing and turn the cash back to shareholders. Everyone wins and it is hard to screw up a big one-time dividend.

Douglas A. McIntyre is an editor at 247wallst.com

MOST NOTEWORTHY: The medical supplies and devices sector, East West Bancorp, Tempur Pedic and AbitibiBowater were today's noteworthy initiations:

• Credit Suisse initiated the medical supplies and devices sector with a Market Weight rating and started shares of Edwards Lifesciences (NYSE: EW) and Becton, Dickinson and Co (NYSE: BDX) with Outperform ratings and Medtronic (NYSE: MDT) and Boston Scientific (NYSE: BSX) with Neutral ratings.
  
• East West Bancorp (NASDAQ: EWBC) was initiated with a Buy rating and $36 target at B. Riley; the firm's target implies a 23.1% potential total return over the next twelve months including the stock's 1.35% dividend yield.
  
• Tempur Pedic (NYSE: TPX) was started with an Outperform rating at William Blair, as they find the current valuation attractive for long-term investor given the company's strong position in the specialty sleep products.
  
• Deutsche Bank resumed coverage of AbitibiBowater (NYSE: ABH) with a Hold rating and $29 target, citing the strength of the Canadian dollar and difficult newsprint fundamentals.

OTHER INITIATIONS:

• Banc of America initiated shares of JA Solar (NASDAQ: JASO) and Trina Solar (NYSE: TSL) with Buy ratings and targets of $73 and $76, and initiated Horizon Lines (NYSE: HRZ) and Solarfun Power (NASDAQ: SOLF) with Neutral ratings and targets of $34 and $14.

Boston Scientific (NYSE: BSX) is a company in trouble. It spent too much for medical device company Guidant, leaving it with $8.3 billion in debt. And sales of its drug-coated stents have been hurt by clotting problems. The company lost $272 million in the last quarter.

The combination of high debt and poor earnings has done a great deal of damage to the stock. The company's shares are down about 22% this year.

Boston Scientific has come up with a simple plan, which is to sell itself off in pieces until its debt comes down to a level that it can service. Today, the company sold its cardiac surgery and vascular surgery units for $750 million. The buyer was Getinge, a Swedish company. The two units were part of Guidant.

The announcement is another example of the hideous cycle that begins when companies overreach. From late 2003 to early 2005, before BSX bought Guidant and took on mountains of debt, its shares moved from $13 to $35. Earnings were strong and shareholders were happy. But BSX management could not resist buying another medical device company and got into a brutal bidding war with Johnson & Johnson (NYSE: JNJ), which pushed the price of Guidant to an irrational level.

Now, Boston Scientific can sell off what it bought, but probably at a lower price.

Douglas A. McIntyre is an editor at 247wallst.com.

MOST NOTEWORTHY: Air France, BHP Billiton, AstraZeneca, Broadcom and Savvis were today's noteworthy downgrades:

• Goldman removed shares of Air France (NYSE: AKH) from its Conviction Buy List due to the increase in the price of fuel and the possibility of an economic slowdown.
  
• Goldman downgraded BHP Billiton (NYSE: BHP) to Neutral from Buy and removed the stock from its Pan-Europe Buy List due to valuation.
  
• Merrill Lynch downgraded shares of AstraZeneca (NYSE: AZN) to Sell from Neutral to reflect increased competition from generic-drug makers, a poor pipeline and slow earnings growth.
  
• Wachovia downgraded shares of Broadcom Corporation (NASDAQ: BRCM) to Hold from Buy to reflect valuation and the company's lower than expected Q3 results. Shares were also lowered to Hold from Buy at Deutsche Bank.
  
• Stanford lowered Savvis (NASDAQ: SVVS) to Hold from Buy and notes that the company's Q3 results and Q4 revenue guidance brings the company's 2007 revenue outlook $15M below the consensus, and advises investors to remain on the sidelines. The firm believes the company's strategy is sound, but that its execution has been slow.

OTHER DOWNGRADES:

• Blockbuster (NYSE: BBI) and Akzo Nobel (OTC: AKZOY) were downgraded to Neutral from Overweight at JP Morgan.
  
• Friedman Billings downgraded the E&P sector, including Brigham Exploration Company (NASDAQ: BEXP), Mariner Energy (NYSE: ME) and Nobel Energy (NYSE: NBL) to Market Perform from Outperform.
  
• Baird downgraded Plantronics (NYSE: PLT) to Neutral from Outperform.
  
• Goldman downgraded Boston Scientific (NYSE: BSX) to Neutral from Buy.

Boston Scientific Corp. (NYSE: BSX) reported its Q3 earnings this morning, soundly beating analysts' expectations. Not counting $435 million expenses related to acquisitions and asset sales, Boston Scientific's profit in the latest quarter was 20 cents per share, while analysts were expecting just 7 cents per share. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on BSX.

After hitting a one-year high of $18.69 in January, the stock slipped to a 52-week low of $12.11 in August. BSX opened this morning at $14.08. So far today the stock has hit a low of $14.06 and a high of $14.65. As of 10:50, BSX is trading at $14.52, up 67 cents(4.8%). The chart for BSX looks bullish and steady, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.

For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $12.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just 3 months as long as BSX is above $12.50 at January expiration. Boston Scientific would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.

BSX hasn't been below $12.50 by more than a few cents in the past year and has shown support around $13.80 recently. This trade could be risky if today's earnings are not as rosy as they seem at first glance, but even if that happens, this position could be protected by strong support just below $14, where the stock just bottomed.

Brent Archer is an options analyst and writer at Investors Observer.

Visit AOL Money & Finance for more earnings coverage

Things seemed to be going so well for medical device maker Medtronic (NYSE: MDT). It recently got FDA approval for its drug coated stent, a product that holds clogged arteries open. At over $56, its stock had moved near a 52-week high.

The few days of celebration ended abruptly. The company warned that a wire in its newest defibrillator models has malfunctioned in hundreds of patients. It may have even caused several deaths. According to The New York Times, a defibrillator is a "device that shocks faltering hearts back into normal rhythm." The company is asking that 235,000 patients see their doctors to check for the defect. The Times also writes that replacing the wire on a heart device like a defibrillator is considered by experts to be far more dangerous than replacing the device itself.

The announcement points to one of the problems that big medical device companies face as their products become more complex. Boston Scientific (NYSE: BSX) has recently lost significant revenue as studies have shown that its drug coated stents may cause blood clots in the heart. That and other problems have taken the company's stock from over $27 less than two years ago to $15 in recent trading.

It is too early to say what may have caused the defect in the Medtronic device, but if there is a hint that the defect was discovered some time ago or that the product's flaw was due to faulty manufacturing, some smart attorney will be filing a class action suit before the year's end.

Douglas A. McIntyre is a partner at 24/7 Wall St.

MOST NOTEWORTHY: Boston Scientific (BSX), Medtronic (MDT), St. Jude Medical (STJ), Bankrate (RATE) and AXA (AXA) were today's noteworthy initiations:

• Thomas Wiesel initiated coverage of the Medical Devices Industry:
• Boston Scientific (NYSE: BSX) was initiated with an Underweight rating, expecting shares to Underperform peers due to reductions in estimates, risks to the stent business and valuation.
  
• Medtronic (NYSE: MDT) was initiated with an Overweight rating, saying attractively valued as they believe the growth in underlying markets may be more robust than the current sentiment suggests.
  
• St. Jude Medical (NYSE: SJT) was initiated with an Overweight rating, saying shares offer exposure to attractive drivers, a management team with the best track record in the segment, and a potential acquisition candidate.
  

• Stephens believes the recent weakness in Bankrate (NASDAQ: RATE) due to "turmoil" in the market has created an attractive entry point, starting shares with an Overweight rating.

• Morgan Stanley assumed coverage of AXA (NYSE: AXA) with an Overweight rating, citing an attractive risk/reward and strong free cash flow...

OTHER INITIATIONS:

• S1 Corp (NASDAQ: SONE) was initiated with a Market Perform rating at Avondale.

• Needham started Blue Coat Systems (NASDAQ: BCSI) with a Buy rating.

• Credit Suisse initiated AK Steel (NYSE: AKS) with a Neutral rating.

• Jefferies started Molex (NASDAQ: MOLX) with a Hold rating.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Recent bad news for heart patients is also bad news for Boston Scientific (NYSE:BSX), makers of a drug-coated stent that recent studies suggest may increase the possibility of blood clots. The effectiveness of stents over medications was also called into question in a March report.

The one-two punch to Boston Scientific's prize product caused sales for these stents to drop from $647 million last year, 2nd quarter to $437 million. Overall, net sales for the company were down slightly from 2006 year/year. However, this year's totals included revenue from Guidant, acquired in April of 2006, which should have pumped up the revenue.

Net income for the quarter was $0.08 EPS, shy of analyst expectations of $0.094. Backing out the costs of the Guidant purchase, which impacted both this quarter and 2006 2nd quarter, and the company realized only $.0.18 EPS compared to $0.31 in 2006.

The Wall Street Journal (subscription required) reported recently that Moody's is considering downgrading BSX's bonds to junk bond status, as the debt burden of the Guidant purchase looms more problematical with the shortfall in anticipated income. The company now expects income for the balance of 2007 to match 2nd quarter performance, far short of the $2.4 billion it projected when announcing the Guidant deal.

Until the company can show us new products that can replace the stent's profitability, or demonstrate sustainable belt-tightening to raise the bottom line, this is a stock I'd approach with trepidation.

Boston Scientific Corp. (NYSE: BSX) opened at $15.80. So far today the stock has hit a low of $15.69 and a high of $15.90. As of 11:40, BSX is trading at 15.66, up 0.22 (1.4%).

After hitting a one year high of 23.49 a full year ago, the stock has been down to flat over the past twelve months. BSX is up today after naming Sam Leno, formerly of Zimmer Holdings (NYSE: ZMH), as the company's new CFO. Recent technical indicators for BSX have been neutral and improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider a November bull-put credit spread below the $12.50 range. BSX hasn't been below $12.50 in almost 5 years and has shown support around $15 recently. This trade could be risky if BSX's recent slide continues, but even if that happens, this position could be protected by what looks like a bottom forming in the chart.

Brent Archer is an options analyst and writer at Investors Observer. Do you have any deadwood in your portfolio? Check out the 18 Warning Signs That Tell You When To Dump A Stock.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in BSX or ZMH.