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Abbott (ABT) Exceeds Q3 Earnings, '17 Guidance Narrowed

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Abbott Labs (ABT - Free Report) reported third-quarter 2017 adjusted earnings from continuing operations of 66 cents per share, ahead of the Zacks Consensus Estimate by a penny and up 11.9% year over year. This adjusted quarterly number also remained at the upper end of the company’s guidance range of 64 cents to 66 cents.

Reported earnings for the quarter came in at 32 cents per share, as compared to the year-ago loss of 24 cents per share.

Third-quarter worldwide sales came in at $6.83 billion, up 28.8% year over year on a reported basis. This quarterly figure also remains slightly ahead of the Zacks Consensus Estimate of $6.71 billion.

Abbott Laboratories Price, Consensus and EPS Surprise

Abbott Laboratories Price, Consensus and EPS Surprise

Abbott Laboratories price-consensus-eps-surprise-chart | Abbott Laboratories Quote

On a comparable operational basis (adjusting the impact of foreign exchange, certain acquisitions and divestments), sales increased 5.6% year over year in the reported quarter.

Quarter in Detail

Abbott operates through four segments – Established Pharmaceuticals Division (EPD), Medical Devices, Nutrition and Diagnostics.

EPD sales were up 15.7% on a reported basis (up 14.3% on comparable operational basis) to $1,171 billion. There was a positive impact of 1.4% on the back of currency fluctuations. Sales in key emerging markets increased 18.5% (up 18%), driven by double-digit growth in Brazil, Russia, India and China. As expected, sales in India were positively impacted by purchasing patterns following the implementation of a new Goods and Services Tax system that lowered second quarter sales in that country.

The Medical Devices business sales spiked 98.2% on a reported basis to $2.59 billion. On a comparable operational basis, sales increased 5.6%.

Cardiovascular and Neuromodulation sales soared 214.1% on a reported basis (up 3.6% on comparable operational basis) on double-digit growth in Electrophysiology, Structural Heart, Heart Failure and Neuromodulation.

Vascular product sales growth however, was sluggish at 0.2% on a on a comparable operational basis. Within Rhythm Management, the company registered a loss of 12.1% on a comparable operational basis as sales in the U.S. were impacted by continued competitive dynamics in the magnetic resonance (MR)-conditional category of products.

Diabetes Care sales improved 19.1% on a comparable operational basis, driven by double-digit international sales growth, led by continued consumer uptake of FreeStyle Libre — the revolutionary continuous glucose monitoring system of Abbott.

Nutrition sales were up 0.8% year over year on a reported basis (same on a comparable operational basis). Foreign exchange favorably affected sales by a marginal 0.1%. Pediatric Nutrition sales increased 0.7% on a comparable operational basis. Adult Nutrition sales were up 0.9% on a comparable operational basis.

Diagnostics sales rose 5.4% year over year on a reported basis (up 5.2% on a comparable operational basis). Core Laboratory and Point of Care Diagnostics sales both grew 5.6%, on a comparable operational basis. Molecular Diagnostics sales were up 1.1% as strong growth in the infectious disease testing business was partially offset by the planned scale-down of the genetics business.

Guidance

Abbott has narrowed down its full-year 2017 guidance. Adjusting for certain net specified items for the full year, the adjusted earnings per share from continuing operations are now expected to stay within a band of $2.48-$2.50 (earlier guidance was $2.43-$2.53). The current Zacks Consensus Estimate is pegged at $2.49, at the midpoint of the projected range.

The company has also provided its fourth-quarter 2017 adjusted earnings per share guidance. It expects to report adjusted earnings from continuing operations in the range of 72 cents to 74 cents for the quarter. The current Zacks Consensus Estimate of 73 cents falls at the midpoint of the projected range.

Our Take

One more time, Abbott has successfully exceeded the Zacks Consensus Estimate on both earnings and sales front. We are optimistic about the company’s strong and consistent EPD and Medical Devices performance. However, these strong performances were to some extent offset by sluggish Nutrition business.

The company continues to benefit from the recently completed acquisition of St. Jude Medical, which has started offering it an industry leading pipeline across cardiovascular, neuromodulation, diabetes and vision care.

In 2017, the company is effectively executing its existing operating model which focuses on selling portfolio in core therapeutic areas. Also, emerging market performance remains extremely promising on several new strategic developments.

Abbott currently carries a Zacks Rank #2 (Buy).

Stocks to Consider

A few other top-ranked stocks in the medical sector are Integra LifeSciences Holdings Corp. (IART - Free Report) , IDEXX Laboratories, Inc. (IDXX - Free Report) and Thermo Fisher Scientific Inc. (TMO - Free Report) . While Integra LifeSciences sports a Zacks Rank #1 (Strong Buy), IDEXX Laboratories and Thermo Fisher carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Integra LifeSciences has a long-term expected earnings growth rate of 10.8%. The stock rallied roughly 19.1% over the last six months.

IDEXX Laboratories has a long-term expected earnings growth rate of 19.8%. The stock gained 40.9% last year.

Thermo Fisher has a long-term expected earnings growth rate of 11.7%. The stock gained 26.1% last year.

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