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3 Reasons to Retain Abbott (ABT) Stock in Your Portfolio

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Abbott Laboratories (ABT - Free Report) is well poised for growth in the coming quarters, courtesy of its solid Diabetes business. The optimism led by the company's solid third-quarter 2022 performance, along with growing momentum in its Established Pharmaceuticals Division (EPD) business, is expected to contribute further. However, forex woes and Nutrition Product recall impeding growth are concerning.

Over the past year, this Zacks Rank #3 (Hold) stock has lost 18.8% compared with 46.8% decline of the industry and 17.4% fall of the S&P 500 composite.

This renowned provider of a diversified line of healthcare products has a market capitalization of $180.65 billion. The company projects 5.1% growth for the next five years and expects to maintain its strong performance. Abbott’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 21.8%.

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Let’s delve deeper.

Progress With Diabetes Business: We are optimistic about Abbott’s diabetes business. This business achieved robust organic sales growth in the third quarter of 2022, led by strong growth in FreeStyle Libre. In the quarter, sales of FreeStyle Libre exceeded $1 billion. Abbott’s user base expanded to approximately 4.5 million users globally. In the United States, where sales grew more than 40%, the company initiated the full launch of Libre 3. This latest device can automatically deliver up-to-the-minute glucose readings with more accuracy in the world’s smallest and thinnest wearable sensor.

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. These markets include India, Russia, China and Latin America. The company recently noted that banking on the successful execution of its Branded Generic operating model, EPD is well-positioned for sustained growth in many of these growing pharmaceutical markets.

Strong Q3 Results: Abbott’s better-than-expected third-quarter 2022 results buoy optimism. Within the company’s Diagnostics business, excluding COVID testing revenues, sales growth of routine diagnostic tests in the third quarter went up globally. This was fueled by the continued global rollout of the Alinity instrument for immunoassay, clinical chemistry and molecular testing. In Medical Device, global sales growth was also strong. In the United States, sales growth was led by strong double-digit growth in Electrophysiology, Structural Heart and Diabetes Care.


Foreign Exchange Translation Impacts Sales: 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 been constantly hampering the company’s performance in the international markets.

Nutrition Product Recall Impedes Growth: Within Abbott’s Nutrition business, in the third quarter, worldwide Nutrition sales were down on an organic basis, with a significant slump in Pediatric Nutrition sales. The downside in total worldwide Nutrition and Pediatric Nutrition sales 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.

Estimate Trend

Abbott has been witnessing a positive estimate revision trend for 2022. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 4.4% north to $5.21.

The Zacks Consensus Estimate for the company’s fourth-quarter 2022 revenues is pegged at $9.47 billion, suggesting a 17.4% decline from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , ShockWave Medical, Inc. (SWAV - Free Report) and McKesson Corporation (MCK - Free Report) .

AMN Healthcare, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 3.3%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 10.9%.

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

AMN Healthcare has gained 0.9% against the industry’s 36.6% decline in the past year.

ShockWave Medical, carrying a Zacks Rank #2 at present, has an estimated growth rate of 23.6% for 2023. SWAV’s earnings surpassed estimates in all the trailing four quarters, the average beat being 146.1%.

ShockWave Medical has gained 21.8% against the industry’s 28.8% decline over the past year.

McKesson, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 10.1%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average beat being 4.8%.

McKesson has gained 61.1% against the industry’s 15.2% decline over the past year.

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