Abbott Beats on EPS, Guides In-Line

Abbott Labs ( ABT - Analyst Report ) reported fourth quarter 2012 earnings of $1.51 per share, a penny ahead of the Zacks Consensus Estimate and 4.1% above the year-ago earnings. Including one-time items, fourth quarter earnings decreased 35.3% to 66 cents per share.

Fourth quarter revenues increased 4.4% to $10.8 billion, narrowly beating the Zacks Consensus Estimate of $10.6 billion. Full year earnings came in at $5.07 per share, a penny above the Zacks Consensus Estimate and 8.8% above the year-ago earnings.

Full-year earnings were within the guidance range of $5.06 to $5.08 per share. Revenues increased 2.6% to $39.9 billion in 2012, edging past the Zacks Consensus Estimate of $39.6 billion.

Pharma Business Spun Off

We note that Abbott recently separated its research-based pharmaceuticals business by creating a new company – AbbVie ( ABBV - Snapshot Report ) . The decision to spin off the business was taken back in Oct 2011 when Abbott decided to separate its business into two publicly traded companies – one in diversified medical products and the other in research-based pharmaceuticals.

The research-based pharmaceutical company, AbbVie, includes proprietary pharmaceuticals and biologics including products like Humira, Lupron, Synagis, Kaletra, Creon and Synthroid. The new company started trading from the beginning of 2013.

Quarter in Detail

Fourth quarter results are for the combined company. Almost all the business categories performed well during the quarter. Proprietary Pharmaceutical sales were $5.1 billion, up 7.4%. Humira was a major contributor with sales coming in at $2.7 billion, up 23.1%. Humira recorded sales growth in both the US (31.1%) and international markets (15.2%) during the quarter.

Abbott Labs is looking to get Humira approved for additional indications, which would help drive growth further. Lupron, Androgel, Creon and Synthroid also contributed to Proprietary Pharmaceutical sales growth.

The Nutritionals business grew 10.2% to $1.7 billion. Nutrition sales in the US increased 9.4% to $743 million. Outside the US, Nutrition sales continued to experience double-digit growth with sales increasing 10.8% to $972 million. Strong performance in emerging markets helped drive international nutrition sales.

Other areas that witnessed growth include the Core Laboratory Diagnostics, Molecular Diagnostics, Diabetes Care and Point of Care Diagnostics businesses. Established Pharmaceuticals sales, however, declined 2.4% to $1.3 billion.

In-Line Outlook for 2013

Along with releasing fourth quarter results, Abbott Labs provided guidance for 2013. The company expects 2012 earnings in the range of $1.98 to $2.04 per share. Guidance was in line with the Zacks Consensus Estimate, currently standing at $2.00 per share. The guidance excludes the newly formed AbbVie, which started functioning as an independent company from the beginning of 2013.

Abbott carries a Zacks Rank #5 (Strong Sell) in the short run. However, not all large-cap pharma stocks are performing as poorly as Abbott. Large-cap pharma companies that currently look more attractive include Bayer ( BAYRY - Analyst Report ) and Sanofi ( SNY - Analyst Report ) . Both companies carry a Zacks Rank #2 (Buy).