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Abbott (ABT) Q3 Earnings Top Estimates, Guidance Narrowed

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Abbott Laboratories (ABT - Free Report) reported third-quarter 2018 adjusted earnings from continuing operations of 75 cents per share, a penny ahead of the Zacks Consensus Estimate. The bottom line improved 13.6% year over year and remained at the upper end of the company’s guided range of 73-75 cents. Reported earnings from continuing operation in the quarter came in at 31 cents per share, a 3.1% drop year over year.

Third-quarter worldwide sales came in at $7.66 billion, up 12.1% year over year on a reported basis. The top line remained slightly below the Zacks Consensus Estimate of $7.67 billion.

On an organic basis (adjusting for the impact of foreign exchange as well as certain acquisitions and divestments) sales increased 7.8% 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.

Abbott Laboratories Price, Consensus and EPS Surprise

Abbott Laboratories Price, Consensus and EPS Surprise | Abbott Laboratories Quote

EPD sales dropped 0.9% on a reported basis (improved 5.9% on an organic basis) to $1.16 billion. This included a 6.8% adverse impact of from currency fluctuations. Sales in the key emerging markets declined 2.1% year over year on an 8.9% adverse impact of foreign exchange. Organically, sales improved 6.8% driven by double-digit growth in India and China.

The Medical Devices business sales increased 8.4% on a reported basis to $2.82 billion. On an organic basis, sales grew 9.8%.

Cardiovascular and Neuromodulation sales reportedly (up 4.8% on an organic basis) rose 3.6% on double-digit growth in Electrophysiology and Structural Heart. In Electrophysiology, growth was led by strong performance in cardiac mapping and ablation catheters as well as strong growth of Abbott's Confirm Rx Insertable Cardiac Monitor (ICM). Within Structural Heart, growth was driven by several product areas across Abbott's broad portfolio, including AMPLATZERPFO Occluder and MitraClip.

Diabetes Care sales improved 37.4% (up 39.8% organically), buoyed consistent consumer uptake of FreeStyle Libre, the revolutionary continuous glucose monitoring system of Abbott.

Nutrition sales were up 4% year over year on a reported basis (up 6.1% on an organic basis) to $1.84 billion. Pediatric Nutrition sales increased 8.5% on an organic basis. Adult Nutrition sales were up 3.2% organically.

Diagnostics sales soared 42.6% year over year on a reported basis (up 7.5% on a comparable operational basis) to $1.82 billion. Core Laboratory Diagnostics and Point of Care Diagnostics sales grew 8.1% and 4%, respectively, on an organic basis. Molecular Diagnostics sales were up 6.1% banking on strong growth in the infectious disease testing business. Rapid Diagnostics recorded sales of $481 million, driven by solid contributions from cardiometabolic testing.

Full-Year Guidance

Abbott has narrowed its 2018 adjusted earnings per share guidance. Adjusting for certain net specified items for the full year, adjusted earnings from continuing operations are now expected in the band of $2.87-$2.89 as compared to the earlier-projected range of $2.85-$2.91. The Zacks Consensus Estimate of $2.88 remains within this projected range.

The company has also provided fourth-quarter 2018 adjusted earnings per share outlook. It expects to report adjusted earnings from continuing operations in the range of 80-82 cents. The consensus mark of 81 cents falls within the predicted range.

Our Take

Abbott exited the third quarter on a mixed note with earnings ahead of the Zacks Consensus Estimate and revenues missing the mark. Increasing currency headwinds to some extent dented the company’s strong international performance.

Overall, we are optimistic about Abbott’s strong and consistent EPD and Medical Devices performance organically. Particularly, Abbott has been riding high on a healthy growth within its Diabetes Care business. The company has been hogging the limelight for developments in the flagship, sensor-based continuous glucose monitoring (CGM) system — FreeStyle Libre System. Also, solid contributions from the company’s other two businesses encourage us.

The company continues to benefit from a strong integration synergy of St. Jude Medical, which offers it an industry-leading pipeline across cardiovascular, neuromodulation, diabetes and vision care. We are also impressed by Abbott’s Alere integration. Synergies from this consolidation in the form of revenues from Rapid Diagnostics have been driving the company’s growth.

Meanwhile, the company’s emerging market performance has been extremely promising on several strategic developments.

Zacks Rank & Key Picks

Abbott currently carries a Zacks Rank #3 (Hold).

A few other top-ranked stocks in the broader medical space are Inogen, Inc. (INGN - Free Report) , Baxter International Inc. (BAX - Free Report) , and Edwards Lifesciences Corporation (EW - Free Report) .

Inogen is expected to release third-quarter fiscal 2018 results on Nov 6. The Zacks Consensus Estimate for the quarter’s adjusted EPS is pegged at 52 cents and for revenues stands at $91.1 million. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Baxter is expected to release third-quarter 2018 results on Oct 31. The Zacks Consensus Estimate for the period’s adjusted EPS is 74 cents and for revenues, $2.79 billion. The stock carries a Zacks Rank #2.

Edwards Lifesciences is slated to release third-quarter 2018 results on Oct 23. The Zacks Consensus Estimate for adjusted EPS for the to-be-reported quarter is $1.02 and for the top line, $925 million. The stock carries a Zacks Rank #2.

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