Abbott's (ABT) Base Business Recovers, Lowered View Concerns
Abbott Laboratories ABT has been delivering consistent organic growth in the Established Pharmaceuticals Division (EPD) and Diabetes segments. However, slow growth in the pediatric nutrition business is a challenge. The stock currently carries a Zacks Rank #3 (Hold).
Over the past three months, Abbott has been underperforming the industry. The stock has lost 7.1% against the industry's 0.8% dip. In June 2021, Abbott announced that it has lowered its 2021 guidance due to considerable reduction in recent and projected COVID-19 diagnostic testing demand. Full-year GAAP earnings per share are expected in the band of $2.75 to $2.95, down from the earlier projection of at least $3.74. Adjusted earnings from continuing operations are now expected in the range of $4.30-$4.50 per share, down from the earlier projection of at least $5 per share. The Zacks Consensus Estimate for 2021 is currently pegged at $5.05.
According to the company, significant reductions in the number of COVID-19 cases in the United States and other major developed countries, accelerated rollout of COVID-19 vaccines globally and the latest U.S. health authority guidance and restrictions on testing for fully vaccinated individuals hurt sale growth considerably through April and May.
Abbott Laboratories Price
Abbott Laboratories price | Abbott Laboratories Quote
We are also concerned about the company’s disappointing performance within Pediatric Nutrition wheresales declined 2.5% on difficult year-over-year comparison.
On a positive note, Abbott posted more that 100% adjusted earnings per share growth and 33% organic sales growth in first-quarter 2021. Global COVID-19 testing-related sales were $2.2 billion with rapid tests comprising roughly 85% of it. Base business organic sales growth (excluding COVID-19 testing-related sales) was nearly 6%.
In the first quarter, within Adult Nutrition, the company reported more than 18% growth with Ensure (adult complete and balanced nutrition brand) and Glucerna (diabetes nutrition brand) reporting robust sales. Within pediatric nutrition, in the United States and several international markets, the company captured share with its portfolio of infant formula and toddler brands.
Within Diagnostics, sales increased 115%. During the quarter, BinaxNOW received U.S. emergency use authorization for over-the-counter nonprescription self-use. In April, the company began shipping test kits to major retailers.
Within Medical Device, sales grew nearly 9% led by strong growth in Structural Heart, Rhythm Management, Electrophysiology, and Diabetes Care. Despite disruption in procedure volumes across cardiovascular and neuromodulation businesses earlier this year due to elevated case rates, over all procedural volume improved in the first quarter. The Diabetes Care business particularly has been in the limelight for developments in its flagship, sensor-based continuous glucose monitoring system, FreeStyle Libre.
Within EPD, sales grew over 6% year over year led by double-digit growth in India, China and Brazil. While Abbott continued to see elevated COVID-19 case levels across several emerging markets, the business is executing strongly banking on greater patient access to its branded generic medicines.
Key Picks
A few better-ranked stocks from the broader medical space are Envista Holdings Corporation NVST, Inogen, Inc INGN and IDEXX Laboratories, Inc. IDXX, each carrying a Zacks Rank #2 (Buy). You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.
Envista Holdings has an estimated long-term earnings growth rate of 26%.
Inogen has an estimated long-term earnings growth rate of 33%.
IDEXX Laboratories has a projected long-term earnings growth rate of 20%.
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