Abbott Laboratories (ABT Quick QuoteABT - 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 lost 3.3% compared with the industry’s 18.6% decline. The company posted better-than-expected earnings and revenue numbers for the fourth quarter of 2021. Overall, year-over-year improvements were robust. Barring Neuromodulation, the company registered organic sales growth across all its operating segments. COVID testing-related sales were driven by demand for BinaxNOW, Panbio and ID NOW rapid testing platforms.

Excluding COVID-testing sales, worldwide diagnostic sales grew over 8% in the quarter on the successful rollout of the Alinity suite of diagnostic instruments and expanded test menu across Abbott’s platforms.

Even though COVID-19 case rates surged in the United States and other geographies during the fourth quarter, the company registered strong growth in its more consumer-facing businesses like nutrition, established pharmaceuticals and diabetes care. This mitigated the modest impact of the pandemic that Abbott witnessed from the surge in cases in certain areas of its hospital base businesses.

In the fourth 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. Abbott registered strong growth of Pedialyte, its oral rehydration brand, and market share gains for Similac, the company’s market-leading infant formula brand. In Adult Nutrition, there was 9% year-over-year growth in the fourth quarter on strong demand for Ensure and Glucerna brands, including new users entering these categories and existing customers increasing their usage.

Within EPD, fourth-quarter sales grew 6% year over year led by broad-based growth across several countries including India, Russia, and China that led to overall organic sales growth of 5.2% in key emerging markets.

Abbott Laboratories Price

Abbott Laboratories price | Abbott Laboratories Quote

Within Medical Device, organic sales grew nearly 15.9%, led by strong growth in Structural Heart, Heart Failure, Electrophysiology and Diabetes Care. The Diabetes Care business particularly has been in the limelight for developments in its flagship, sensor-based continuous glucose monitoring system, FreeStyle Libre. Within Medical Device, in the United States, Abbott expanded Medicare reimbursement coverage for MitraClip for more people to get the benefit of it.

The company also launched NeuroSphere Virtual Clinic, a new technology for patients to communicate with physicians and receive new treatment settings remotely. Further, the company received the U.S. FDA approval for its Amplatzer or amulet heart device, which treats people with atrial fibrillation, who are at risk of ischemic stroke. Added to this, Abbott gained CE Mark for Navitor, the company’s latest generation transcatheter aortic valve replacement system.

Abbott has a consistent record of paying dividends with the five-year annualized dividend growth being 12.72%.

On the flip side, with a spike in new COVID-19 case counts through the fourth quarter, Abbott noted a significant rise in COVID-testing sales, a trend that it expects to continue through the first quarter of 2022. For 2022, the company forecasts COVID testing-related sales of approximately $2.5 billion, with a significant portion of these sales expected to occur in the early part of the year. Going by the company’s projections for the full year, it seems that the company apprehends a decline in COVID testing revenues over the latter part of 2022.

Further, based on the current rates, Abbott expects foreign exchange to have an unfavorable impact of approximately 2% on reported sales. Adjusted gross margin is expected to be 58.5% for the year, which considers the projected impact of inflation on certain manufacturing and distribution costs.

Further, Abbott’s Neuromodulation arm reported a 7.5% year-over-year decline on an organic basis in the fourth quarter. Being extremely elective, this business is having a hard time in terms of post-COVID recovery.

Added to this, foreign exchange is a major headwind for Abbott due to a considerable percentage of its revenues coming from outside the United States. The strengthening of the euro and some other developed market currencies has constantly been hampering the company’s performance in the international markets.

Key Picks

Some better-ranked stocks from the broader medical space are AMN Healthcare Services, Inc. (AMN Quick QuoteAMN - Free Report) , Henry Schein, Inc. (HSIC Quick QuoteHSIC - Free Report) and West Pharmaceutical Services, Inc. (WST Quick QuoteWST - Free Report) .

AMN Healthcare, carrying a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 16.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 19.5%, on average. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

AMN Healthcare has outperformed its industry over the past year. AMN has gained 23.8% versus the 62% industry decline.

Henry Schein has an estimated long-term growth rate of 11.8%. HSIC’s earnings surpassed estimates in the trailing four quarters, the average surprise being 21.86%. It currently carries a Zacks Rank #1.

Henry Schein has gained 6.1% compared with the industry’s 1.7% rise over the past year.

West Pharmaceutical has a long-term earnings growth rate of 27.6%. West Pharmaceutical surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 29.4%.

West Pharmaceutical has outperformed its industry over the past year. WST currently carries a Zacks Rank of 2.