It has been about a month since the last earnings report for Abbott (ABT Quick QuoteABT - Free Report) . Shares have lost about 7.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Abbott due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Abbott's Q4 Earnings and Revenues Beat Estimates

Abbott reported fourth-quarter 2022 adjusted earnings of $1.03 per share, which exceeded the Zacks Consensus Estimate by 14.4%. The adjusted figure however declined from the prior-year quarter’s levels by 22%.

The quarter’s adjustments include 44 cents of certain non-recurring items.

GAAP earnings per share came in at 59 cents, a 46.8% plunge year on year.

For the full year, adjusted earnings per share came in at $5.34, exceeding the Zacks Consensus Estimate and the year-ago figure by 2.5%.

Fourth-quarter worldwide sales of $10.09 billion were down 12% year over year on a reported basis. The top line however exceeded the Zacks Consensus Estimate by 6.4%.

On an organic basis (excluding the impact of foreign exchange), sales declined 6.1% year over year in the reported quarter.

Worldwide sales for 2022 were $43.65 billion, up 1.3% from 2021 on a reported basis and 6.4% on an organic basis. The full-year top line exceeded the Zacks Consensus Estimate by 1.4%.

Quarter in Detail

Abbott operates through four segments — Established Pharmaceuticals, Medical Devices, Nutrition and Diagnostics.

In the fourth quarter, Established Pharmaceuticals sales improved 1% on a reported basis (up 7.9% on an organic basis) to $1.22 billion. Organic sales in key emerging markets improved 10.3% year over year. According to Abbott, organic sales improvement was backed by strong growth in several geographies, including India, China, Brazil and Mexico, and across several therapeutic areas, including cardiometabolic, women's health and central nervous system/pain management.

Medical Devices business sales were flat year over year on a reported basis (up 7.4% on an organic basis) at $3.75 billion. U.S. Sales growth was led by strong double-digit growth in Electrophysiology, Structural Heart and Diabetes Care. Internationally, sales growth was negatively impacted by intermittent COVID-19 lockdown restrictions in China as well as supply constraints in certain areas, most notably Electrophysiology and Diabetes Care.

Diabetes Care reported organic growth of 17.4% year over year, led by FreeStyle Libre, which contributed $1.1 billion of revenues in the reported quarter.Structural Heart sales rose 13% and Heart Failure sales improved 5.9% year over year organically. Meanwhile, the Vascular business recorded an organic sales decline of 1% in the quarter under review. Electrophysiology, Rhythm Management and Neuromodulation recorded organic growth of 7.3%, 1.5% and 0.9%, respectively, in the quarter under review.

Nutrition sales were down 11.1% year over year on a reported basis (down 5.7% on an organic basis) to $1.82 billion. Pediatric Nutrition sales registered an 11.8% slump on an organic basis. The downside was due to a manufacturing disruption during 2022 of certain infant formula products at Abbott's Sturgis, MI facility.

Adult Nutrition sales improved 0.5% organically. Per the company, Adult Nutrition sales benefited from improved sales performance of Abbott's complete and balanced nutrition brand, Ensure, globally.

Diagnostics sales were down 26.1% year over year on a reported basis (down 21.3% on an organic basis) to $3.31 billion. Core Laboratory Diagnostics sales were up 2.8% organically. Meanwhile, Molecular Diagnostics declined 44.7% on an organic basis. Rapid Diagnostics sales declined 31.6% on an organic basis, whereas Point of Care Diagnostics sales fell 1.2% organically.

Margins

Gross profit for the reported quarter fell 17.9% year over year to $5.49 billion. Gross margin contracted 396 basis points (bps) to 54.5%.

Selling, general and administrative expenses were down 2.5% year over year to $2.97 billion. Research and development expenses declined 4.9% year over year to $725 million.

The company reported an adjusted operating profit of $1.80 billion for the quarter under review, down 37.8% year over year. Adjusted operating margin, too, contracted 738 bps to 17.8%.

2023 Guidance

Abbott issued its 2023 earnings per share guidance.

Full-year adjusted earnings (excluding specified items of $1.25 per share) are expected to be in the range of $4.30 to $4.50. The current Zacks Consensus Estimate is pegged at $4.39.

Abbott projects full-year 2023 organic sales growth, excluding COVID-19 testing-related sales, of high-single digits and COVID testing-related sales of around $2 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, Abbott has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Abbott has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.