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Abbott Laboratories (ABT - Analyst Report) is scheduled to report fourth quarter 2013 results before the opening bell on Jan 22, 2014. 

Last quarter, Abbott Labs posted a 7.84% positive surprise. On an average, Abbott Labs has posted a 4.57% positive surprise in the last four quarters. Let’s see how things are shaping up for the fourth quarter.

Factors to Influence 4Q Results

Abbott Labs is an extremely diversified company with its presence in the diagnostics, nutrition, generics and medical devices markets after having separated its pharmaceutical business into a new company called AbbVie (ABBV - Analyst Report) in Jan 2013.

However, the business environment was challenging in 2013 due to austerity measures in developed markets and weak economic conditions in developing markets. We believe the pricing pressure in the EU and health care reforms in the U.S. will have a negative impact on sales.

Moreover, we were disappointed by the disruption in international nutrition sales in the third quarter of 2013. The disruption is likely to stretch into the first half of 2014. The nutrition division is the company’s fastest growing business and hence a disruption in business will impact growth rates going forward. China is a key emerging market for Abbott Labs and the disruption is expected to negatively impact the bottom line by approximately 5 cents.

Earnings Whispers?

However, our proven model does not conclusively show that Abbott Labs will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, #2 or #3 to be able to beat consensus estimates. That is not the case here as you will see below.

Zacks ESP:  The ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate Estimate and Zacks Consensus Estimate currently stand at 58 cents.

Zacks Rank #3 (Hold): Abbott Labs’ Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions. 

Stocks to Consider

Here are some large cap pharma stocks you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:

Eli Lilly and Company (LLY - Analyst Report) has Earnings ESP of +1.37% and holds a Zacks Rank #3. Eli Lilly will be reporting fourth quarter 2013 earnings on Jan 30, 2014.

Sanofi (SNY - Analyst Report) has earnings ESP of +2.27% and holds a Zacks Rank #3. Sanofi will report fourth quarter 2013 results on Feb 6, 2014.

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