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Why Is Abbott (ABT) Down 6.4% 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 lost about 6.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Abbott due for a breakout? 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.

Abbott Posts Q1 Earnings Beat, Reports Strong Diagnostics Sales

Abbott reported first-quarter 2020 adjusted earnings from continuing operations of 65 cents per share, exceeding the Zacks Consensus Estimate by 18.2%. Meanwhile, the adjusted figure improved 3.2% from the prior-year quarter.

The quarter’s adjustments include certain non-recurring expenses primarily associated with acquisitions and restructuring actions, among others.

However, the reported earnings from continuing operations came in at 30 cents, reflecting a 21.1% decline, year on year.
First-quarter worldwide sales of $7.73 billion were up 2.5%, year over year, on a reported basis. The top-line figure also surpassed the Zacks Consensus Estimate by 8.4%.

On an organic basis (adjusting for the impact of foreign exchange), sales increased 4.3% year over year in the reported quarter.

Quarter in Detail

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

In the first quarter, EPD sales rose 5.2%, on a reported basis (improved 9.3% on an organic basis), to $1.04 billion. Organic sales in the key emerging markets improved 13.1%, year over year, on a reported basis. This resulted from strong growth across a number of geographies, including Russia, Brazil, and several countries across Latin America and Southeast Asia.

Medical Devices business sales increased 1.4% on a reported basis to $2.94 billion. On an organic basis, sales grew 2.9%. Growth in cardiovascular and neuromodulation businesses was negatively impacted by the reduced procedure volumes due to the coronavirus pandemic. The company is concerned about the ongoing scenario in healthcare and expects these products to return to their usual growth trajectory when normalcy resumes.

Within Diabetes Care, the company registered 35.6% organic growth banking on the solid worldwide adoption of FreeStyle Libre. This device alone registered global sales of more than $600 million in the quarter, marking a surge of 62.5% on an organic basis.

Nutrition sales were up 6.3% year over year, on a reported basis (up 7.3% on an organic basis), to $1.90 billion. Pediatric Nutrition sales improved 6.4%, on an organic basis. Adult Nutrition sales climbed 8.5%, organically. According to the company, sales benefited from the increased demand in late March owing to the shelter-in-place restrictions related to the coronavirus outbreak.

Diagnostics sales were down 0.8%, year over year, on a reported basis (up 0.7% on an organic basis) to $1.83 billion. Core Laboratory Diagnostics sales declined 4.9% on an organic basis, affected by lower routine testing volumes due to the virus outbreak. However, Molecular Diagnostics jumped 30.3%, on an organic basis. Point of Care Diagnostics sales too improved 2.7%, on an organic basis. Rapid Diagnostics sales improved 5.4%, on an organic basis, in the March-end quarter.

2020 Guidance

The uncertainties regarding the duration and impact of the coronavirus pandemic on the company’s overall business have compelled Abbott to suspend its previously-issued 2020 financial guidance.
 

How Have Estimates Been Moving Since Then?

Estimates revision followed a downward path over the past two months.

VGM Scores

At this time, Abbott has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Abbott has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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