It has been about a month since the last earnings report for Abbott (ABT Quick QuoteABT - Free Report) . Shares have added about 5.1% in that time frame, underperforming the S&P 500.

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

Abbott's Q3 Earnings and Revenues Beat Estimates

Abbott reported third-quarter 2023 adjusted earnings of $1.14 per share, which topped the Zacks Consensus Estimate by 3.6%. However, the adjusted figure declined from the prior-year quarter’s levels by 0.9%. The quarter’s adjustments include 32 cents of certain non-recurring items.

GAAP earnings per share came in at 82 cents, which increased 1.2% year over year.

Third-quarter worldwide sales of $10.14 billion were down 2.6% year over year on a reported basis. The top line exceeded the Zacks Consensus Estimate by 3.6%.

On an organic basis (excluding the impact of foreign exchange, the Cardiovascular Systems acquisition, the impact of the business exit and the impact of COVID-19 testing sales), sales rose 13.8% year over year in the reported quarter.

Q3 Results in Detail

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

In the third quarter, Established Pharmaceuticals’ product sales increased 3.2% on a reported basis (up 11.1% on an organic basis) to $1.37 billion.

Organic sales in key emerging markets improved 8.8% year over year. This was led by growth in several geographies and therapeutic areas, including cardiometabolic, women's health and central nervous system/pain management.

The Medical Devices segment’s sales rose 16.6% year over year on a reported basis (up 14.7% on an organic basis) to $4.25 billion.

Sales growth was led by double-digit organic growth in Diabetes Care, Electrophysiology, Structural Heart and Neuromodulation. Several recently launched products and new indications contributed to the strong performance, including Amplatzer Amulet, Navitor, TriClip and AVEIR.

The Diabetes Care division reported organic sales growth of 24.5% year over year, led by FreeStyle Libre, which contributed $1.4 billion to revenues in the reported quarter. Structural Heart sales rose 15.3%, and Heart Failure sales improved 10.9% year over year organically.

The Vascular division recorded organic sales growth of 3.9% in the quarter under review. The Electrophysiology, Rhythm Management and Neuromodulation divisions recorded organic growth of 14.1%, 6% and 15.5%, respectively, in the quarter under review.

Nutrition sales rose 15.5% year over year on a reported basis (up 18.1% on an organic basis) to $2.07 billion.

Pediatric Nutrition sales registered 24.9% growth on an organic basis. Adult Nutrition sales improved 12.4% organically. Per the company, Adult Nutrition sales benefited from the strong global sales performance of Abbott's market-leading complete and balanced nutrition brand, Ensure.

Diagnostics sales were down 32.7% year over year on a reported basis (down 31.9% on an organic basis) to $2.45 billion.

Core Laboratory Diagnostics sales were up 9.7% organically. Molecular Diagnostics declined 27.8% on an organic basis. Rapid Diagnostics sales dropped 58.9% on an organic basis, whereas Point of Care Diagnostics sales rose 9.8% organically.

Margins

In the reported quarter, the gross profit fell 4.2% year over year to $5.54 billion. The gross margin contracted 93 basis points (bps) to 54.6%.

SG&A expenses were down 0.3% year over year to $2.72 billion. R&D expenses decreased 14.1% year over year to $672 million. The company reported an adjusted operating profit of $2.14 billion in the quarter under review, down 5.5% year over year. Also, the adjusted operating margin contracted 66 bps to 21.1%.

2023 Guidance

Abbott provided updated guidance for the full year 2023.

Full-year adjusted earnings (excluding specified items of $1.28 per share) are expected in the range of $4.42-$4.46 (previously $4.30-$4.40). The Zacks Consensus Estimate is pegged at $4.40.

Abbott projects full-year 2023 organic sales growth, excluding COVID-19 testing-related sales, in the low double digits (unchanged from the previous outlook) and COVID-19 testing-related sales of around $1.5 billion (earlier $1.3 billion).

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

Currently, Abbott has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

Abbott has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Abbott belongs to the Zacks Medical - Products industry. Another stock from the same industry, Neogen (NEOG Quick QuoteNEOG - Free Report) , has gained 6.4% over the past month. More than a month has passed since the company reported results for the quarter ended August 2023.

Neogen reported revenues of $228.99 million in the last reported quarter, representing a year-over-year change of +73%. EPS of $0.11 for the same period compares with $0.15 a year ago.

For the current quarter, Neogen is expected to post earnings of $0.15 per share, indicating no change from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Neogen. Also, the stock has a VGM Score of D.