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Abbott (ABT) Q2 Earnings Beat, Molecular Diagnostic Sales Drop

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Abbott Laboratories (ABT - Free Report) reported second-quarter 2021 adjusted earnings from continuing operations of $1.17 per share, which exceeded the Zacks Consensus Estimate by 15.8%. The adjusted figure improved 105.3% from the prior-year quarter.

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

Reported earnings from continuing operations came in at 66 cents, reflecting 120% surge year on year.

Second-quarter worldwide sales of $10.22 billion were up 39.5% year over year on a reported basis. The top line too exceeded the Zacks Consensus Estimate by 5.1%. On an organic basis (adjusting for the impact of foreign exchange), sales improved 35% 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 second quarter, EPD sales improved 16.4% on a reported basis (up 14.5% on an organic basis) to $1.18 billion. Organic sales in key emerging markets improved 18.4% year over year. According to Abbott, organic sales improvement was backed by strong growth across several geographies, including India, China, Russia, and many countries across Latin America.

Abbott Laboratories Price, Consensus and EPS Surprise

Abbott Laboratories Price, Consensus and EPS Surprise

Abbott Laboratories price-consensus-eps-surprise-chart | Abbott Laboratories Quote

Medical Devices business sales improved 51.3% on a reported basis (up 45.1% on an organic basis) to $3.67 billion. All the sub segments in the quarter reported organic revenue growth.

Diabetes Care reported organic growth of 31.6% year over year led by FreeStyle Libre and Libre Sense, which represented 42.9%oforganic sales growthin the reported quarter. Structural Heart sales improved 42.2% organically on 82.1% growth in MitraClip sales on an organic basis.

When compared with the pre-pandemic figures of 2019, Medical Devices sales improved 19.2% on a reported basis (up 15.6% on an organic basis) in the second quarter.

Nutrition sales were up 11.9% year over year on a reported basis (up 9.5% on an organic basis) to $2.11 billion. Pediatric Nutrition sales registered an improvement of 4.4% on an organic basis, banking on strong sales of toddler brands, Pedialyte and PediaSure,and continued share growth in infant nutrition.

Adult Nutrition sales improved 15.6% organically. According to the company, Adult Nutrition sales benefited from improved sales performance of Abbott's complete and balanced nutrition brand Ensure and diabetes nutrition brand, Glucerna.

Diagnostics sales were up 62.8% year over year on a reported basis (up 57.2% on an organic basis) to $3.23 billion. Core Laboratory Diagnostics sales were up 26.7% organically. However, Molecular Diagnostics plunged 23.1% on an organic basis. Rapid Diagnostics sales improved 177.6% on an organic basis. Point of Care Diagnostics sales rose 14.1% organically.

2021 Guidance

Abbott reiterated its 2021 EPS guidance (previously updated in June). Full-year GAAP earnings per share areexpected in the band of $2.75 to $2.95. Adjusted earnings from continuing operations are still expected in the range of $4.30- $4.50 per share. The current Zacks Consensus Estimate is pegged at $4.35.

In June, Abbott had lowered its 2021 guidance due to considerable reduction in recent and projected COVID-19 diagnostic testing demand. 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 are likely to impede sales growth.

Our Take

Abbott posted better-than-expected earnings and revenue numbers for the second quarter of 2021. Overall, year-over-year improvements were robust. The company registered organic sales growth across all its operating segments. COVID-19 testing-related sales were driven by demand for BinaxNOW, Panbio and ID NOW rapid testing platforms.

Within the Diabetes Care business, the company has been in the limelight for developments in its flagship, sensor-based continuous glucose monitoring system, FreeStyle Libre. Within Adult Nutrition, the company gained from growing demand under the pandemic-led situation.

However, with the vaccination trend and steady decline in new cases, we expect significant reduction in COVID-19 testing sales for the company over the next few months.

Zacks Rank & Key Picks

Currently, Abbott carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks from the same space include AMN Healthcare Services Inc (AMN - Free Report) , Catalent, Inc. (CTLT - Free Report) and Align Technology, Inc. (ALGN - Free Report) .

Catalent currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for its fourth-quarter fiscal 2021 adjusted EPS is currently pegged at $1.04. The consensus estimate for fourth-quarter revenues is $1.13 billion.

The Zacks Consensus Estimate for AMN Healthcare’s second-quarter 2021 adjusted EPS is currently pegged at $1.47. The consensus estimate for second-quarter revenues is pegged at $829.4 million. The company currently carries a Zacks Rank #2 (Buy).

Align Technology currently carries a Zacks Rank #2. The Zacks Consensus Estimate for its second-quarter 2021 adjusted EPS is currently pegged at $2.56. The consensus estimate for its revenues stands at $937.5 million.

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