Abbott Laboratories ABT has been delivering consistent organic growth in the Established Pharmaceuticals Division (EPD) and Diabetes segments. However, the soft neuromodulation business is a challenge. The stock currently carries a Zacks Rank #3 (Hold).
Over the past year, Abbott has been outperforming the industry it belongs to. The stock has gained 14.2% compared with the industry’s 3.7% growth.
The company posted better-than-expected earnings and revenue numbers for the third quarter of 2021. Overall, year-over-year improvements were robust. Excluding COVID-19 testing-related sales, which totaled $1.9 billion in the quarter, organic sales increased 12% year over year. Even though COVID-19 case rates surged in the United States and other geographies during the third quarter, the strong growth in the more consumer-facing businesses like Nutrition, Established Pharmaceuticals and Diabetes Care was encouraging. This mitigated the modest impacts of the pandemic that Abbott witnessed from the surge in cases in certain areas of its hospital base businesses.
In the third quarter, within Nutrition, strong growth was led by U.S. pediatric and international adult nutrition. In Pediatric Nutrition, the company registered strong growth in the United States from continued share gains in infant formula and toddler portfolio. Sales of Pedialyte, the company’s market-leading rehydration brand, once again grew in strong double digits, driven by the solid market uptake of several recently launched new products as well as investments in direct consumer promotion. In Adult Nutrition, there was mid-teens growth internationally on strong demand for Ensure and Glucerna brands, including new users entering these categories and existing customers increasing their usage.
Abbott Laboratories Price
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Within Diagnostics, sales increased over 45%, led by growing demand for Abbott’s portfolio of COVID-19 tests as well as an improvement in the base business. During the quarter, as the Delta variant spread and COVID cases surged, particularly in the United States, demand for testing, especially rapid tests increased significantly. Within EPD, third-quarter sales grew over 15% year over year led by double-digit growth in China, Russia and India, which led to overall sales growth of 18% in key emerging markets.
Within Medical Device, sales grew nearly 13% led by double-digit growth in Rhythm Management, Structural Heart, Heart Failure and Diabetes Care. The Diabetes Care business has been in the limelight for developments in its flagship, sensor-based continuous glucose monitoring system, FreeStyle Libre.
In Structural Heart, the company broadened its portfolio in large, fast-growing markets with the recent FDA approvals of Amulet (to help reduce the risk of stroke in people with atrial fibrillation) and Portico (for transcatheter aortic valve replacement). In Heart Failure, the company announced results from the GUIDE-HF trial of the CardioMEMS System. The company noted that CardioMEMS demonstrated a 28% reduction in heart failure hospitalizations. Abbott has filed for label expansion with the FDA based on the trial data released in the middle of this year.
Meanwhile, Abbott has a consistent record of paying dividends with 5-year annualized dividend growth being 12.72%.
On the flip side, with a spike in new COVID-19 cases through the third quarter, Abbott noted modest impacts on its base business. Some softness was seen as the Delta variant spread and new cases increased in the United States, particularly in August and half of September. This led to a slowdown in the company’s hospital base business in certain areas.
Further, Abbott’s Neuromodulation arm reported an 8.3% year-over-year decline on an organic basis in the third quarter. Abbott noted that this business is having a hard time in terms of post-COVID recovery given its elective nature. The company is currently not quite hopeful of any rebound in the fourth quarter within this business.
A few better-ranked stocks from the broader Medical space include Thermo Fisher Scientific Inc. TMO, Intuitive Surgical, Inc. ISRG and Alcon Inc. ALC, each presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Thermo Fisher has a long-term earnings growth rate of 13%.
Intuitive Surgical has a long-term earnings growth rate of 9.5%.
Alcon Inc. has a long-term earnings growth rate of 17.7%.
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