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Abbott (ABT) Hits a New 52-Week High: What's Driving It?
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Abbott Laboratories (ABT - Free Report) scaled a new 52-week high of $129.40 on Sep 3, before closing the session marginally lower at $128.94. The stock has rallied 9% since its second-quarter earnings announcement on Jul 22.
The company is witnessing an upward trend in its stock price, prompted by solid second-quarter 2021 performance on strong sales growth across all four of the company’s major businesses. The company’s EPD business continues to gain momentum. Further, Diabetes Care business sales were strong on solid worldwide adoption of FreeStyle Libre. However, the company in June lowered its 2021 financial guidance, which raises apprehension.
Let’s delve deeper.
Factors at Play
Impressive Q2 Results: Abbott posted better-than-expected earnings and revenue numbers for the second quarter of 2021. Overall, the year-over-year improvements were robust. The company posted more that 100% adjusted earnings per share growth and 35% organic sales growth for the quarter. Excluding sales from COVID-19 testing business, organic sales grew nearly 11.5% in the second quarter driven by strong sales growth across all four of the company’s major businesses, including double-digit growth in Established Pharmaceuticals, Nutrition and Medical Devices. Within Diagnostics, sales increased 55%, led by growing demand for Abbott’s portfolio of COVID-19 tests as well as improvement in the base business. Within Medical Device, sales grew nearly 45% led by strong growth in Structural Heart, Electrophysiology, Heart Failure and Diabetes Care.
EPD Business Gains Momentum: Abbott’s EPD business operates solely in emerging geographies, with leading positions in many of the largest and fastest growing pharmaceutical markets for branded generics in the world. Within EPD, growth in the second quarter was led by double-digit sales growth in India, China, Russia and Brazil, which led to overall sales growth of nearly 18.5% in key emerging markets. While Abbott continued to see elevated COVID-19 case levels across several emerging markets, the business is executing strongly on greater patient access to its branded generic medicines. For 2021, the company earlier forecast improvements in existing EPD product demand. Also, a continued steady cadence of new product introductions will contribute to growth.
Image Source: Zacks Investment Research
Progress With Diabetes Business: This business achieved growth of 31.6% in the second quarter of 2021 on solid worldwide adoption of FreeStyle Libre. This device alone registered global sales of $900 million. The global user base for Libre has now surpassed 3.5 million driven by strong execution of market expansion and awareness efforts as well as the company’s ongoing new product launch activity in every major market around the world.
Downsides
Lower Guidance: With the vaccination trend and steady decline in new cases, there has been a significant reduction in COVID-19 testing sales for the company over the past few months. In June 2021, Abbott announced that it has lowered its 2021 guidance on considerable reduction in recent and projected COVID-19 diagnostic testing demand. Full-year GAAP earnings per share are expected in the band of $2.75 to $2.95, down from the earlier projection of at least $3.74. Adjusted earnings from continuing operations are now expected in the range of $4.30- $4.50 per share, down from the earlier projection of at least $5 per share.
Foreign Exchange Translation Impacts Sales: Foreign exchange is a major headwind for Abbott due to considerable percentage of its revenues coming from outside the United States. The strengthening of euro and some other developed market currencies has been constantly hampering the company’s performance in international markets.
Image: Shutterstock
Abbott (ABT) Hits a New 52-Week High: What's Driving It?
Abbott Laboratories (ABT - Free Report) scaled a new 52-week high of $129.40 on Sep 3, before closing the session marginally lower at $128.94. The stock has rallied 9% since its second-quarter earnings announcement on Jul 22.
The company is witnessing an upward trend in its stock price, prompted by solid second-quarter 2021 performance on strong sales growth across all four of the company’s major businesses. The company’s EPD business continues to gain momentum. Further, Diabetes Care business sales were strong on solid worldwide adoption of FreeStyle Libre. However, the company in June lowered its 2021 financial guidance, which raises apprehension.
Let’s delve deeper.
Factors at Play
Impressive Q2 Results: Abbott posted better-than-expected earnings and revenue numbers for the second quarter of 2021. Overall, the year-over-year improvements were robust. The company posted more that 100% adjusted earnings per share growth and 35% organic sales growth for the quarter. Excluding sales from COVID-19 testing business, organic sales grew nearly 11.5% in the second quarter driven by strong sales growth across all four of the company’s major businesses, including double-digit growth in Established Pharmaceuticals, Nutrition and Medical Devices. Within Diagnostics, sales increased 55%, led by growing demand for Abbott’s portfolio of COVID-19 tests as well as improvement in the base business. Within Medical Device, sales grew nearly 45% led by strong growth in Structural Heart, Electrophysiology, Heart Failure and Diabetes Care.
EPD Business Gains Momentum: Abbott’s EPD business operates solely in emerging geographies, with leading positions in many of the largest and fastest growing pharmaceutical markets for branded generics in the world. Within EPD, growth in the second quarter was led by double-digit sales growth in India, China, Russia and Brazil, which led to overall sales growth of nearly 18.5% in key emerging markets. While Abbott continued to see elevated COVID-19 case levels across several emerging markets, the business is executing strongly on greater patient access to its branded generic medicines. For 2021, the company earlier forecast improvements in existing EPD product demand. Also, a continued steady cadence of new product introductions will contribute to growth.
Progress With Diabetes Business: This business achieved growth of 31.6% in the second quarter of 2021 on solid worldwide adoption of FreeStyle Libre. This device alone registered global sales of $900 million. The global user base for Libre has now surpassed 3.5 million driven by strong execution of market expansion and awareness efforts as well as the company’s ongoing new product launch activity in every major market around the world.
Downsides
Lower Guidance: With the vaccination trend and steady decline in new cases, there has been a significant reduction in COVID-19 testing sales for the company over the past few months. In June 2021, Abbott announced that it has lowered its 2021 guidance on considerable reduction in recent and projected COVID-19 diagnostic testing demand. Full-year GAAP earnings per share are expected in the band of $2.75 to $2.95, down from the earlier projection of at least $3.74. Adjusted earnings from continuing operations are now expected in the range of $4.30- $4.50 per share, down from the earlier projection of at least $5 per share.
Foreign Exchange Translation Impacts Sales: Foreign exchange is a major headwind for Abbott due to considerable percentage of its revenues coming from outside the United States. The strengthening of euro and some other developed market currencies has been constantly hampering the company’s performance in international markets.
Zacks Rank and Key Picks
Currently, Abbott carries a Zacks Rank #3 (Hold).
A few better-ranked stocks from the broader medical space are Envista Holdings Corporation (NVST - Free Report) , BellRing Brands, Inc. (BRBR - Free Report) and Henry Schein, Inc. (HSIC - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.
Envista Holdings has an estimated long-term earnings growth rate of 27%.
BellRing Brands has an estimated long-term earnings growth rate of 29%.
Henry Schein has a projected long-term earnings growth rate of 14%.