Abbott Laboratories ( ABT Quick Quote ABT - Free Report) has been delivering consistent organic growth in the Established Pharmaceuticals Division (EPD) and Diabetes segments. However, the soft neuromodulation business is a challenge. The stock currently carries a Zacks Rank #3 (Hold).
Over the past year, Abbott has been outperforming the
industry it belongs to. The stock has gained 14.2% compared with the industry’s 3.7% growth.
The company posted better-than-expected earnings and revenue numbers for the third quarter of 2021. Overall, year-over-year improvements were robust. Excluding COVID-19 testing-related sales, which totaled $1.9 billion in the quarter, organic sales increased 12% year over year. Even though COVID-19 case rates surged in the United States and other geographies during the third quarter, the strong growth in the more consumer-facing businesses like Nutrition, Established Pharmaceuticals and Diabetes Care was encouraging. This mitigated the modest impacts of the pandemic that Abbott witnessed from the surge in cases in certain areas of its hospital base businesses.
In the third quarter, within Nutrition, strong growth was led by U.S. pediatric and international adult nutrition. In Pediatric Nutrition, the company registered strong growth in the United States from continued share gains in infant formula and toddler portfolio. Sales of Pedialyte, the company’s market-leading rehydration brand, once again grew in strong double digits, driven by the solid market uptake of several recently launched new products as well as investments in direct consumer promotion. In Adult Nutrition, there was mid-teens growth internationally on strong demand for Ensure and Glucerna brands, including new users entering these categories and existing customers increasing their usage.
Meanwhile, Abbott has a consistent record of paying dividends with
5-year annualized dividend growth being 12.72%.
On the flip side, with a spike in new COVID-19 cases through the third quarter, Abbott noted modest impacts on its base business. Some softness was seen as the Delta variant spread and new cases increased in the United States, particularly in August and half of September. This led to a slowdown in the company’s hospital base business in certain areas.
Further, Abbott’s Neuromodulation arm reported an 8.3% year-over-year decline on an organic basis in the third quarter. Abbott noted that this business is having a hard time in terms of post-COVID recovery given its elective nature. The company is currently not quite hopeful of any rebound in the fourth quarter within this business. Key Picks
A few better-ranked stocks from the broader Medical space include
Thermo Fisher Scientific Inc. ( TMO Quick Quote TMO - Free Report) , Intuitive Surgical, Inc. ( ISRG Quick Quote ISRG - Free Report) and Alcon Inc. ( ALC Quick Quote ALC - Free Report) , each presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Thermo Fisher has a long-term earnings growth rate of 13%.
Intuitive Surgical has a long-term earnings growth rate of 9.5%.
Alcon Inc. has a long-term earnings growth rate of 17.7%.