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Can Established Pharmaceuticals Up Abbott (ABT) Q2 Earnings?

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Abbott Laboratories’ (ABT - Free Report) Established Pharmaceuticals Division (EPD) business has been recording operational sales growth in the last few quarters. We expect this strength to further get reflected in second-quarter 2018 results, scheduled for release on Jul 18.

Click here to know how the company’s overall Q2 performance is likely to pan out.

Key Catalysts

The EPD business majorly focuses on the emerging markets wherein key areas include India, Russia, China and numerous regions in Latin America as well as Brazil alongside other countries. Sales in the key emerging markets increased 6.8% organically, driven by double-digit growth in India, China and Brazil in the last reported quarter.

Per the company, key emerging markets represent the most attractive long-term growth opportunities for Abbott's branded generics product portfolio. Management believes that these markets will continue to offer immense opportunities with favorable demographics.  Accordingly, the Zacks Consensus Estimate of $903 million for EPD revenues from the key emerging markets indicates a 13.1% rise from the year-ago quarter’s tally.

Favorable currency translation also left a positive impact of 3.1% on EPD revenues in the first quarter of 2018. Moreover, it is encouraging to note that management expects foreign exchange to continue acting as a tailwind in the to-be-reported quarter.

However, management seems concerned about the decelerating revenue growth rate of EPD in Russia due to a temporary disruption in distribution channel dynamics based on certain distributors’ consolidations. Per the company, this should continue through the second quarter too.

Also, the ongoing tensions between the United States and China regarding the imposition of tariffs on imports, has raised concerns for major MedTech players as any adverse move might affect their sales performance in China in the near term.

Overall, we are upbeat about management’s anticipation of double-digit organic growth in EPD sales during the second quarter. Furthermore, the Zacks Consensus Estimate for EPD revenues of $1.15 billion shows a 12.9% increase from the prior-year period.

In EPD, Abbott’s consistent focus on enhancing local capabilities and expanding product portfolio within core therapeutic areas is aimed at specifically addressing local market needs. These efforts from the company also continue to consolidate its leadership position in the EPD markets. Abbott’s sale of developed market businesses along with acquisitions of CFR Pharmaceuticals in Latin America and Veropharm in Russia has contributed to its EPD business.

Zacks Rank & Stocks to Consider

Abbott carries a Zacks Rank #3 (Hold).

Here are a few medical stocks worth considering from the same space as these comprise the right combination of elements to beat on earnings this time around:

ResMed Inc. (RMD - Free Report) has an Earnings ESP of +3.97% and a Zacks Rank #1 (Strong Buy). You can see  the complete list of today’s Zacks #1 Rank stocks here.

Stryker Corporation (SYK - Free Report) has an Earnings ESP of +0.13% and a Zacks Rank #2.

McKesson Corporation (MCK - Free Report) has an Earnings ESP of +3.95% and a Zacks Rank of 3.

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