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Why Is Abbott (ABT) Up 6% Since Last Earnings Report?

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It has been about a month since the last earnings report for Abbott (ABT - Free Report) . Shares have added about 6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Abbott due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Abbott Posts In Line Q4 Earnings, Provides '19 View

Abbott reported fourth-quarter 2018 adjusted earnings from continuing operations of 81 cents per share, in line with the Zacks Consensus Estimate. The bottom line improved 9.5% year over year and fell within the company’s guided range of 80-82 cents. Reported earnings from continuing operation in the quarter came in at 37 cents against the year-ago loss of 48 cents per share.

Full-year adjusted EPS was $2.88, a 15.2% improvement from the year-ago period. However, it missed the Zacks Consensus Estimate by a penny.

Fourth-quarter worldwide sales came in at $7.77 billion, up 2.3% year over year on a reported basis. The top line remained slightly below the Zacks Consensus Estimate of $7.79 billion.

On an organic basis (adjusting for the impact of foreign exchange as well as certain acquisitions and divestments), sales increased 6.4% year over year in the reported quarter.

For 2018, sales were $30.6 billion, up 11.6% on a reported basis and up 7.3% on an organic basis from 2017. The top line remained in line with the Zacks Consensus Estimate.

Quarter in Detail

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

In the fourth quarter, EPD sales dropped 4.8% on a reported basis (improved 3.6% on an organic basis) to $1.09 billion. This included an 8.4% adverse impact from currency fluctuations. Sales in the key emerging markets declined 6.2% year over year on a 10.5% adverse impact of foreign exchange. Organically, sales improved 4.3% in this market.

The Medical Devices business sales increased 6.7% on a reported basis to $2.92 billion. On an organic basis, sales grew 9%.

Cardiovascular and Neuromodulation sales reportedly (up 4.8% on an organic basis) rose 6.7% on double-digit growth in Electrophysiology and Structural Heart.In Electrophysiology, growth was led by strong performance in cardiac mapping and ablation catheters. Within Structural Heart, growth was driven by several product areas across Abbott's broad portfolio, including AMPLATZERPFO Occluder and MitraClip.

Diabetes Care sales improved 28.3% (up 32.4% organically), buoyed consistent consumer uptake of FreeStyle Libre, the revolutionary continuous glucose monitoring system of Abbott.

Nutrition sales were down 0.4% year over year on a reported basis (up 3.6% on an organic basis) to $1.78 billion. Pediatric Nutrition sales increased 3.7% on an organic basis. Adult Nutrition sales were up 3.5% organically.

Diagnostics sales were up 2.9% year over year on a reported basis (up 7.4% on a comparable operational basis) to $1.96 billion. Core Laboratory Diagnostics sales grew 9.4% while Point of Care Diagnostics slipped 5.1%, on an organic basis. Molecular Diagnostics sales were up 3.8% banking on strong growth in the infectious disease testing business. Rapid Diagnostics recorded sales of $548 million, driven by solid contributions from cardiometabolic testing.

2019 Guidance

Abbott has initiated its 2019 guidance.

Adjusting for certain net specified items for the full year, adjusted earnings from continuing operations are expected in the band of $3.15-$3.25. The Zacks Consensus Estimate of $3.19 remains within this projected range. Organic sales growth is expected in the range of 6.5% -7.5%. The Zacks Consensensus Estimate for the top line is pegged at $32.03 billion.

The company has also provided first-quarter 2019 adjusted earnings per share outlook. It expects to report adjusted earnings from continuing operations in the range of 60-62 cents. The consensus mark of 66 cents falls outside the predicted range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.72% due to these changes.

VGM Scores

Currently, Abbott has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Abbott has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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