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Why Is Abbott (ABT) Up 2% Since Its Last Earnings Report?

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It has been about a month since the last earnings report for Abbott Laboratories (ABT - Free Report) . Shares have added about 2% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is ABT due for a pullback? 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 drivers.

Recent Earnings

Abbott reported first-quarter 2018 adjusted earnings from continuing operations of 59 cents per share, beating the Zacks Consensus Estimate by a cent. The bottom line also improved 22.9% year over year and met the high end of the company’s guided range of 57-59 cents. Moreover, reported earnings in the quarter came in at 23 cents per share compared with the year-ago figure of 22 cents.

First-quarter worldwide sales came in at $7.39 billion, up 16.6% year over year on a reported basis. The top line also exceeded the Zacks Consensus Estimate of $7.26 billion by 1.8%.

On an organic basis (adjusting for the impact of foreign exchange and certain divestments) sales increased 6.9% year over year in the reported quarter.

Quarter in Detail

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

EPD sales rose 9.9% on a reported basis (up 6.8% on an organic basis) to $1.04 billion. This included a positive impact of 3.1% from currency fluctuations. Sales in the key emerging markets increased 8.7% (up 6.8%), driven by double-digit growth in India, China and Brazil.

The Medical Devices business sales increased 14.6% on a reported basis to $2.74 billion. On an organic basis, sales grew 9.4%.

Cardiovascular and Neuromodulation sales reportedly (up 6.2% on an organic basis) rose 10.5% on double-digit growth in Electrophysiology and Neuromodulation.

Vascular product sales, however, declined 6% on a reported basis (up 1.6%). Within Rhythm Management, the company saw a sales increase of 4.7% on a reported basis (a decline of 1.2%).

Diabetes Care sales improved 44.2% (up 32.9%), buoyed by double-digit international sales growth, led by a consistent consumer uptake of FreeStyle Libre, the revolutionary continuous glucose monitoring system of Abbott.

Nutrition sales were up 7% year over year on a reported basis (up 4.7% on an organic basis). Foreign exchange drove sales by 2.2%. Pediatric Nutrition sales increased 7.3% on an organic basis. Adult Nutrition sales were up 4.3% organically.

Diagnostics sales soared 58.7% year over year on a reported basis (up 5.5% on a comparable operational basis). Core Laboratory and Point of Care Diagnostics sales grew 6.3% and 4%, respectively, on an organic basis. Molecular Diagnostics sales were up a nominal 1.3% as strong growth in the infectious disease testing business was partially offset by the planned scale down in other testing areas, primarily in the United States. Rapid Diagnostics recorded sales of $559 million, driven by solid contributions from infectious disease testing including flu and strep testing.

Full-Year Guidance

Abbott has reiterated its 2018 earnings per share guidance. Adjusting for certain net specified items for the full year, adjusted earnings from continuing operations are still expected in the band of $2.80-$2.90. The Zacks Consensus Estimate of $2.86 remains within this projected range.

The company has also provided second-quarter 2018 adjusted earnings per share outlook. It expects to report adjusted earnings from continuing operations in the range of 70-72 cents. The consensus mark of 71 cents falls within but near the lower end of the predicted range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to three lower.

Abbott Laboratories Price and Consensus

 

Abbott Laboratories Price and Consensus | Abbott Laboratories Quote

VGM Scores

At this time, ABT has a great Growth Score of A, though it is lagging a lot on the momentum front with a C. The stock was also allocated a grade of C on the value side, putting it in the middle 20% 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.

Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.

Outlook

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




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