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Why Is Abbott (ABT) Up 1.4% Since Last Earnings Report?

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It has been about a month since the last earnings report for Abbott (ABT - Free Report) . Shares have added about 1.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Abbott due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Abbott Posts Q3 Earnings Beat, Reports Y/Y Improvement

Abbott reported third-quarter 2020 adjusted earnings from continuing operations of 98 cents per share, which exceeded the Zacks Consensus Estimate by 8.9%. The adjusted figure improved 16.7% from the prior-year quarter.

The quarter’s adjustments include certain non-recurring intangible amortization expense and other expense primarily associated with acquisitions and restructuring actions among others.

Reported earnings from continuing operations came in at 69 cents, reflecting 30.2% rise year on year.

Third-quarter worldwide sales of $8.85 billion were up 9.6% year over year on a reported basis. The top line surpassed the Zacks Consensus Estimate by 4.7%. On an organic basis (adjusting for the impact of foreign exchange), sales improved 10.6% year over year in the reported quarter.

Quarter in Detail

Abbott operates through four segments — Established Pharmaceuticals Division (EPD), Medical Devices, Nutrition, and Diagnostics.

In the third quarter, EPD sales declined 9.3% on a reported basis (down 3.3% on an organic basis) to $1.09 billion. Organic sales in key emerging markets dropped 1.8%, year over year due to market softness across several countries as a result of the spread of COVID-19.

Medical Devices business sales improved 3.4% on a reported basis to $3.17 billion. On an organic basis, sales improved 2.6%. Barring Rhythm Management and Vascular,all other sub segments reported organic revenues growth in the quarter. According to the company, cardiovascular and neuromodulation sales growth and procedure volumes improved significantly as demand returned to more normalized levels.

In Diabetes Care, the company registered 25.2% organic growth, banking on solid worldwide adoption of FreeStyle Libre. This device alone registered global sales growth of 35.6% on an organic basis.

Nutrition sales were up 2.6% year over year on a reported basis (up 4.1% on an organic basis), to $1.92 billion. Pediatric Nutrition sales declined 2.5% on an organic basis. Adult Nutrition sales improved 12.4% organically. According to the company, Adult Nutrition sales benefited from improved U.S. and international sales performance of Ensure, Abbott's market-leading complete and balanced nutrition brand. In Pediatric Nutrition, however, U.S. growth of Pedialyte and growth in Southeast Asia were offset by challenging conditions in Greater China.

Diagnostics sales were up 38.2%, year over year on a reported basis (up 38.8% on an organic basis) to $2.64 billion. Core Laboratory Diagnostics sales were up 0.8% on an organic basis. Molecular Diagnostics surged 313.6% on an organic basis. Rapid Diagnostics sales too improved 83% on an organic basis in the September-end quarter. However, Point of Care Diagnostics sales declined 9.7% on an organic basis.

2020 Guidance

The company updated its earnings guidance for 2020.

The company now projects adjusted earnings per share from continuing operations to be at least $3.55 for 2020 (earlier the expectation was $3.35 per share). The current Zacks Consensus Estimate is pegged at $3.30.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 13.93% due to these changes.

VGM Scores

Currently, Abbott has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Abbott has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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