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Here's Why Investors Should Retain Abbott (ABT) Stock Now
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Abbott Laboratories (ABT - Free Report) has been gaining from robust organic sales growth across its core operating segments, barring Nutrition. The Established Pharmaceuticals Division (EPD) business saw impressive results across several geographies and therapeutic areas. The FDA approval of FreeStyle Libre 3 continuous glucose monitoring system (CGM) instills optimism too. However, unfavorable foreign exchange movements and continued lockdowns in China hamper business performance.
In the past year, the Zacks Rank #3 (Hold) stock has lost 16.9% compared with a 48.6% fall of the industry and an 11.4% drop of the S&P 500.
The renowned medical device company has a market capitalization of $183.35 billion. Its earnings for the second quarter of 2022 surpassed the Zacks Consensus Estimate by 31.2%.
In the past five years, the company registered earnings growth of 17.7%, which is ahead of the 9.7% rise and the S&P 500’s 13.4% increase. The company’s long-term expected growth rate of 5.4% compares with the industry’s growth projection of 13.5% and the S&P 500’s projected 11.4% increase.
Image Source: Zacks Investment Research
Let’s delve deeper.
Key Drivers
Impressive Q2 Results: Abbott exited the second quarter of 2022 with better-than-expected earnings and revenues. Organic sales increased 14.5% in the reported quarter, led by EPD, diagnostics and medical devices growth. COVID-19 test sales totaled $2.3 billion during the second quarter. Rapid tests accounted for more than 95% of the total COVID-19 test sales, including BinaxNOW in the United States, Panbio internationally, and ID NOW globally. Based on a solid first-half 2022 performance, Abbott increased its earnings per share guidance to at least $4.90 for the full year.
EPD Business Gains Momentum: Abbott’s EPD business operates solely in emerging geographies, with leading positions in many of the world’s largest and fastest-growing pharmaceutical markets for branded generics. In the second quarter, Abbott achieved 9% organic sales growth within EPD led by double-digit growth across countries like China, Brazil, Colombia, Mexico, and Vietnam. The company also saw substantial growth across therapeutic areas, including cardiometabolic, respiratory and central nervous system/pain management.
Progress With Diabetes Business: We are encouraged by the Diabetes arm’s organic sales growth of 19.8% in the second quarter. The upside was led by strong growth in FreeStyle Libre, which represented organic sales growth of 25%. Added to this, the latest FDA clearance of FreeStyle Libre 3 CGM has been a major upside of the quarter. The FreeStyle Libre 3 is the world's smallest and thinnest wearable glucose sensor that delivers results with the highest level of accuracy in the industry.
Downsides
Nutrition Sales Discouraging: In the second quarter, worldwide Nutrition sales were down 4.5% on an organic basis, with a 13.4% slump in Pediatric Nutrition sales. This downside can be attributed to a voluntary recall and manufacturing shutdown of certain infant formula products manufactured at one of Abbott's U.S. plants since last February.
Forex Woes: Since Abbott derives a sizeable portion of its revenues from outside the U.S., currency fluctuations continue to pose significant challenges for the company. Foreign exchange had an unfavorable impact of 4.2% year over year on Abbott’s second-quarter sales.
Tension in China Continues: Abbott’s second-quarter procedure volume was significantly down in China as COVID-led lingering lockdown continued to hamper business. While expanding its nutrition business in emerging markets, the company is facing weaknesses in Greater China on challenging market dynamics.
Estimate Trend
In the past 60 days, the Zacks Consensus Estimate for Abbott’s 2022 earnings has moved north by 3.7% to $4.99.
The Zacks Consensus Estimate for its 2022 revenues is pegged at $42.39 billion, suggesting a 1.6% decline from the 2021 comparable figure.
Zacks Rank and Key Picks
Currently, Abbott carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , ShockWave Medical, Inc. (SWAV - Free Report) and McKesson Corporation (MCK - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 3.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.7%, on average. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has lost 7% against the industry’s 34.4% fall.
ShockWave Medical, sporting a Zacks Rank #1 at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
ShockWave Medical has outperformed its industry in the past year. SWAV has gained 34.8% against the industry’s 28.9% fall over the past year.
McKesson has an estimated long-term growth rate of 9.9%. The company surpassed earnings estimates in the trailing three quarters and missed in one, delivering a surprise of 13%, on average. It currently carries a Zacks Rank #2 (Buy).
McKesson has outperformed its industry in the past year. MCK has gained 82.6% against the industry’s 11.7% fall.
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Here's Why Investors Should Retain Abbott (ABT) Stock Now
Abbott Laboratories (ABT - Free Report) has been gaining from robust organic sales growth across its core operating segments, barring Nutrition. The Established Pharmaceuticals Division (EPD) business saw impressive results across several geographies and therapeutic areas. The FDA approval of FreeStyle Libre 3 continuous glucose monitoring system (CGM) instills optimism too. However, unfavorable foreign exchange movements and continued lockdowns in China hamper business performance.
In the past year, the Zacks Rank #3 (Hold) stock has lost 16.9% compared with a 48.6% fall of the industry and an 11.4% drop of the S&P 500.
The renowned medical device company has a market capitalization of $183.35 billion. Its earnings for the second quarter of 2022 surpassed the Zacks Consensus Estimate by 31.2%.
In the past five years, the company registered earnings growth of 17.7%, which is ahead of the 9.7% rise and the S&P 500’s 13.4% increase. The company’s long-term expected growth rate of 5.4% compares with the industry’s growth projection of 13.5% and the S&P 500’s projected 11.4% increase.
Image Source: Zacks Investment Research
Let’s delve deeper.
Key Drivers
Impressive Q2 Results: Abbott exited the second quarter of 2022 with better-than-expected earnings and revenues. Organic sales increased 14.5% in the reported quarter, led by EPD, diagnostics and medical devices growth. COVID-19 test sales totaled $2.3 billion during the second quarter. Rapid tests accounted for more than 95% of the total COVID-19 test sales, including BinaxNOW in the United States, Panbio internationally, and ID NOW globally. Based on a solid first-half 2022 performance, Abbott increased its earnings per share guidance to at least $4.90 for the full year.
EPD Business Gains Momentum: Abbott’s EPD business operates solely in emerging geographies, with leading positions in many of the world’s largest and fastest-growing pharmaceutical markets for branded generics. In the second quarter, Abbott achieved 9% organic sales growth within EPD led by double-digit growth across countries like China, Brazil, Colombia, Mexico, and Vietnam. The company also saw substantial growth across therapeutic areas, including cardiometabolic, respiratory and central nervous system/pain management.
Progress With Diabetes Business: We are encouraged by the Diabetes arm’s organic sales growth of 19.8% in the second quarter. The upside was led by strong growth in FreeStyle Libre, which represented organic sales growth of 25%. Added to this, the latest FDA clearance of FreeStyle Libre 3 CGM has been a major upside of the quarter. The FreeStyle Libre 3 is the world's smallest and thinnest wearable glucose sensor that delivers results with the highest level of accuracy in the industry.
Downsides
Nutrition Sales Discouraging: In the second quarter, worldwide Nutrition sales were down 4.5% on an organic basis, with a 13.4% slump in Pediatric Nutrition sales. This downside can be attributed to a voluntary recall and manufacturing shutdown of certain infant formula products manufactured at one of Abbott's U.S. plants since last February.
Forex Woes: Since Abbott derives a sizeable portion of its revenues from outside the U.S., currency fluctuations continue to pose significant challenges for the company. Foreign exchange had an unfavorable impact of 4.2% year over year on Abbott’s second-quarter sales.
Tension in China Continues: Abbott’s second-quarter procedure volume was significantly down in China as COVID-led lingering lockdown continued to hamper business. While expanding its nutrition business in emerging markets, the company is facing weaknesses in Greater China on challenging market dynamics.
Estimate Trend
In the past 60 days, the Zacks Consensus Estimate for Abbott’s 2022 earnings has moved north by 3.7% to $4.99.
The Zacks Consensus Estimate for its 2022 revenues is pegged at $42.39 billion, suggesting a 1.6% decline from the 2021 comparable figure.
Zacks Rank and Key Picks
Currently, Abbott carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , ShockWave Medical, Inc. (SWAV - Free Report) and McKesson Corporation (MCK - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 3.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.7%, on average. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has lost 7% against the industry’s 34.4% fall.
ShockWave Medical, sporting a Zacks Rank #1 at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
ShockWave Medical has outperformed its industry in the past year. SWAV has gained 34.8% against the industry’s 28.9% fall over the past year.
McKesson has an estimated long-term growth rate of 9.9%. The company surpassed earnings estimates in the trailing three quarters and missed in one, delivering a surprise of 13%, on average. It currently carries a Zacks Rank #2 (Buy).
McKesson has outperformed its industry in the past year. MCK has gained 82.6% against the industry’s 11.7% fall.