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Can Steady Overall Growth Drive Abbott's (ABT) Q1 Earnings?

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Abbott (ABT - Free Report) is slated to report first-quarter 2018 results, before the market opens on Apr 18. Last quarter, the company’s earnings per share exceeded the Zacks Consensus Estimate by 1.4%. Moreover, Abbott has delivered positive earnings surprises in the trailing four quarters, the average beat being 4.5%. Let's see how things are shaping up for this announcement.

Factors at Play

Over the past few quarters, Abbott has been on a healthy growth trajectory inthe Medical Devices business. The company has been hogging the limelight for developments in the flagship, sensor-based continuous glucose monitoring (CGM) system — FreeStyle Libre System. Notably, the FreeStyle Libre system is partially or fully covered in 21 countries, including France, Germany and Japan.

Historically, the company has been witnessing solid growth in the global Diabetes Care business, primarily on the back of contributions from FreeStyle Libre. This apart, investors are confident about Abbott’s developments in other businesses which form part of the Medical Devices segment. The Zacks Consensus Estimate for Medical Devices revenues of $2.68 billion indicates a rise of 11.7% from the year-ago quarter.

Similar to the prior quarter, Abbott is expected to gain from strong performance by the Established Pharmaceuticals Division (“EPD”) business, which has been recording operational sales growth in the last few quarters. Management expects high single-digit sales growth in the first quarter of 2018. Furthermore, the Zacks Consensus Estimate for EPD revenues of $1.09 billion shows a rise of 14.7% from the year-ago quarter.

Abbott Laboratories Price and EPS Surprise

 

We are also upbeat about the Diagnostics business which has been going strong on solid contributions from all sub-segments — Core Laboratories Diagnostics, Molecular Diagnostics and Point of Care. Moreover, synergies from the Alere buyout, in the form of revenues from Rapid Diagnostics, have been benefiting the company.

Moreover, management expects Rapid Diagnostics to contribute around $5 million in the first quarter. The Zacks Consensus Estimate for Diagnostic revenues of $1.76 billion shows a rise of 51.7% from the year-ago quarter.

We encouragingly note that Nutrition is Abbott’s fastest-growing business, courtesy of an aging population, increasing rate of chronic diseases and the rise of the middle class in the emerging markets. Furthermore, Abbott’s pediatric nutrition business continues to be strong in the United States. Thus, the Zacks Consensus Estimate for Nutrition revenues of $1.73 billion indicates a rise of 5.5% from the year-ago quarter.

Favorable currency translation also had a positive impact of 2% on total revenues in the last reported quarter. We encouragingly note that management expects foreign exchange to boost results in the to-be-reported quarter, driving the top line by 3.5%.

Overall, first-quarter total revenues are projected at $7.26 billion, up 14.5% from the prior-year quarter.

What Our Model Suggests

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Abbott has a Zacks Rank #3 and an Earnings ESP of +0.89%, a combination that suggests that the company is likely to beat estimates.

The Zacks Consensus Estimate for earnings of 58 cents reflects a 20.8% rise on a year-over-year basis.

Other Stocks Worth a Look

Here are a few other medical stocks worth considering as they also have the right combination of elements to post an earnings beat this quarter.

Myriad Genetics, Inc. (MYGN - Free Report) has an Earnings ESP of +0.61% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Henry Schein, Inc. (HSIC - Free Report) has an Earnings ESP of +3.34% and a Zacks Rank #3.

Quest Diagnostics Incorporated (DGX - Free Report) has an Earnings ESP of +3.19% and a Zacks Rank #3.

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