Abbott Labs shines with strong quarter, buyback announcement | Wilnesh News
Medical device maker Abbott Laboratories reported better-than-expected quarterly results on Wednesday and raised its profit forecast for the third consecutive quarter. Shares rose more than 1%, shaking off an initial lackluster reaction. Revenue in the three months ended September 30 rose 4.9% to $10.64 billion, beating expectations of $10.55 billion, according to data provider LSEG. Organic sales excluding COVID-19 testing increased 8.2% compared with the same period last year. It’s unclear whether analyst estimates are comparable. Adjusted earnings per share (EPS) was $1.21, 1 cent higher than LSEG’s forecast, and grew 6.14% annually. ABT YTD Mountain Abbott Laboratories stock performance so far this year. Abbott stock’s outperformance relative to the market and healthcare peers is extending. The stock entered Wednesday’s trading session up just over 10% since the close on July 26 – after the company was ordered to pay $495 million in a court case over its premature infant formula. King, the case has been a major event. The gains led the closely watched S&P 500 health care exchange-traded fund, which has gained 6.5% and 1.9% respectively during the same period. Bottom Line In the third quarter, Abbott Laboratories showed why we should hold on to the stock in the face of legal troubles that surfaced earlier this year and spooked investors. We reiterate our $130 price target and Level 2 rating, which means we will wait for a pullback before adding to our position. In July, Abbott’s market capitalization fell to a 2024 low of $174.1 billion, about $32 billion lower than in March, after its rivals in the premature infant formula market lost a court battle and Abbott itself cases have also become the focus of attention. We fought the stock over the next few months, believing the sell-off was overblown, especially given the scientific community’s support for Abbott’s view that these formulas were medically necessary for premature infants, and Does not cause intestinal disease commonly abbreviated as NEC. Earlier this month, three U.S. agencies offered more support for the use of these formulas. At Wednesday’s session high, Abbott had recouped all of its market value losses since March 14. “There was a lot to like about Abbott’s quarter.” Comments began with Abbott’s medical devices segment, which saw revenue grow about 12% to $4.75 billion, better than expected, as shown in the chart below. From an organic perspective, excluding the impact of currency fluctuations and divestitures, medical device sales grew 13.3%. It’s a good thing when a company’s division with the largest sales is the division with the fastest growth rate – which is the case at Abbott. FreeStyle Libre, a continuous glucose monitor (CGM) for diabetics, continued to maintain impressive growth this quarter, with organic sales growing 21%, up slightly from the previous three months. While Abbott has benefited from the struggles of CGM rival Dexcom, Chief Executive Robert Ford remains optimistic about the market’s near- and long-term prospects. “This is a mass-market opportunity that we have,” he said, noting that there are currently about 10 million CGM users worldwide, but there are more than 100 million people with diabetes in developed countries. Abbott and its peers are increasingly targeting continuous glucose monitoring to non-diabetics, hoping health-conscious people will use biosensors to learn how their bodies respond to factors such as food, stress and exercise. Abbott launched an over-the-counter CGM called Lingo in the United States in early September, and Ford said the product was “off to a very good start.” People can buy a sensor pack for $49, a two-sensor pack for $89, or a six-sensor pack for $249. The two-sensor package is the most popular version, he said. The sensors have a lifespan of about two weeks, and Ford said he’s been surprised by the reorder rate so far. Ford said Abbott is targeting $10 billion in CGM sales by 2028 and Lingo represents a “great opportunity” to achieve that goal over time. Another bright spot: Abbott Labs announced its board of directors approved a new $7 billion stock purchase plan. Ford said there are fewer mandates through 2021. Abbott repurchased $750 million worth of stock in the third quarter, and Ford said executives believed there was a disconnect between stock valuations and the company’s business fundamentals. In fact, Abbott typically prioritizes investing in its product pipeline over stock buybacks, so the fact that management is stepping up its buyback program does indicate how they feel about the current stock price. Abbott’s nutritional products business, which includes brands like Ensure protein powder and PediaSure children’s beverages, is a weak point, as it was in the second quarter. FactSet data showed sales fell about 0.3% year-on-year to $2.07 billion, below analysts’ expectations of $2.17 billion. From an organic perspective, the segment’s revenue grew 3.4%. Ford said the international pediatrics business was the biggest drag on nutrition this quarter, blaming it on Abbott’s “commercial execution” early in the quarter. Ford said it quickly became aware of the problem and took steps to address it, including personnel changes and inventory adjustments at dealers. Ford said early indications are that Abbott has taken the right corrective actions and that growth in the unit and across the board should improve in the current quarter. Specifically, in the lawsuit, Ford once again vigorously defended premature infant formula. He said statements from three U.S. health agencies – the Food and Drug Administration, the Centers for Disease Control and Prevention and the National Institutes of Health – “said a lot.” “It’s a very strong statement,” Ford said, though he noted that the judge in the ongoing trial in Missouri has not yet allowed it to be submitted as evidence in the case. He said he expected the statement, along with an accompanying report on the NEC and the formula, to be used as evidence for a jury to consider in a future case. Abbott’s recent stock performance shows investors are increasingly comfortable with the risk of litigation, but it’s too early to declare complete victory. This is why we typically hold off on adding positions. Still, there’s no doubting Abbott’s fundamental strength. In due course, this should attract increasing attention. Abbott Laboratories Why We Have It: Abbott is a rapidly growing, high-quality medical technology company. The stock has been facing two unresolved issues: declining Covid test sales and concerns that the adoption of GLP-1 will disrupt its leading continuous glucose monitor. As Abbott’s organic sales growth continues to be strong, the market will realize that both of these concerns are overblown. Competitors: Dexcom and Edwards Lifesciences Weight in Club Portfolio: 2.89% Last Buy: May 29, 2024 Launch: January 29, 2024 Guidance Abbott Laboratories now forecasts adjusted earnings per share of $4.64 to to $4.70, with the midpoint up one cent compared to previous guidance of $4.61 to $4.71. This is the third consecutive quarter in which Abbott has raised its mid-point earnings per share forecast. The company reiterated its full-year organic sales growth forecast of 9.5% to 10%. (Jim Cramer’s Charitable Trust is long ABT. For a full list of stocks, see here.) As a subscriber to Jim Cramer’s CNBC Investing Club, you will Receive trade alerts before Jim Cramer trades. Jim waits 45 minutes after sending a trade alert before buying or selling stocks in his charitable trust portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing a trade alert before executing the trade. The investment club information above is subject to our Terms and Conditions and Privacy Policy and our Disclaimer. No fiduciary duty or obligation shall exist or arise upon your receipt of any information relating to the Investment Club. No specific results or profits are guaranteed.
Attendees walk past the Abbott booth during CES 2024 at the Las Vegas Convention Center on January 10, 2024 in Las Vegas, Nevada.
Ethan Miller | Getty Images
Medical device manufacturer Abbott Laboratories It reported better-than-expected quarterly results on Wednesday and raised its earnings forecast for the third straight quarter. Shares rose more than 1%, shaking off an initial lackluster reaction.
