Abbott ‘very cheap’ confirms our belief after surprising legal win

Shares of Abbott Laboratories surged on Friday after the club holding company won a surprise victory in a trial examining the safety of formula for premature infants. A jury in a Missouri state court on Thursday night found that Abbott Laboratories’ special milk formula was not linked to a young boy’s development of a serious intestinal disease called necrotizing enterocolitis (NEC) – ending a closely watched series of events by investors. About five weeks of trial. The jury also found Reckitt Benckiser subsidiary Mead Johnson and St. Louis Children’s Hospital not liable in the case. The plaintiffs argued that Abbott’s and Mead Johnson’s formulas – used to treat premature babies in neonatal intensive care units – increased NEC’s risk and that the companies failed to properly disclose that risk. Abbott and Mead Johnson strongly deny the accusations and argue that the products are medically necessary treatments for babies in situations where breast milk is not available. “We are pleased with the jury’s decision,” Abbott spokesman Scott Stoffel said in a statement to CNBC on Friday morning. “This decision reinforces what we, the medical community and regulators have said: nutritional products for preterm infants are safe and there is no reliable scientific evidence that they cause or contribute to NEC. Abbott maintains the important role of its preterm infant formula in breast milk fortification Drug used in hospitals to nourish premature babies ABT YTD Mountain Abbott Laboratories stock performance year-to-date The bigger picture Investors were nervous ahead of Thursday night’s ruling because both companies have lost similar cases this year — —Mead Johnson lost its case in March and Abbott Labs lost its case in late July. Mead’s failure in March in particular brought the NEC issue into the spotlight, causing both companies’ stocks to suffer sharp long-term losses. Sell. We’ve repeatedly added to Abbott’s stock when the stock fell, believing the magnitude of the decline in market cap didn’t fully reflect the potential losses the company would have to pay if legal proceedings didn’t go well, even as the medical community sided with Abbott That includes three major U.S. health agencies, which issued statements last month supporting specialty infant formulas like Abbott Labs’ legal hangover is real, even as its stock price has risen in recent months. As of Thursday’s close, the stock is up about 13% from its 2024 low set on July 18, and the stock is expected to remain close to those levels based on Friday’s premarket gains. It faces other cases related to its specialty formula, but the stock’s reaction on Thursday night clearly showed that, rising more than 4.5%, Jim Cramer said on CNBC on Friday. : “They won a case they should have lost…the days of plaintiffs filing lawsuits against Abbott are over. “This stock is very cheap,” he added. Abbott’s stock price on Friday was trading at about 22 times forward earnings, below the five-year average of 24 times, according to FactSet. One reason the victory is significant: The case is being heard in a venue that is generally considered plaintiff-friendly, and Cramer has repeatedly pointed out that the case Abbott Laboratories lost in July was also heard in a Missouri state court. Those concerns were compounded during the trial in October, when the judge did not allow recent statements from U.S. health agencies to be presented to the jury. “There is no conclusive evidence that preterm infant formula causes NEC,” the FDA, Centers for Disease Control and Prevention and the National Institutes of Health wrote in an October statement. At the time, we announced the study The declaration is a win for Abbott, but we need to adjust our expectations after the judge’s decision. Nonetheless, we think Abbott Laboratories will likely lose this case, but at least as trials begin in other states, the company will likely be able to leverage supportive statements from the FDA, CDC, and NIH to shore up its defense. With victory in hand, Abbott Laboratories will now begin the next phase of its legal battle on a stronger footing. Hopefully, ultimately, the conversation about Abbott Laboratories will focus squarely on its attractive fundamentals, which were reflected in last month’s third-quarter earnings report. When that happens, healthcare investors should like what they hear. (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 is created or created by any information you receive in connection with the Investment Club. No specific results or profits are guaranteed.

Stacey Westcott | Chicago Tribune | Tribune News Service | Getty Images

Abbott Laboratories Club Holdings shares rose on Friday after a surprise victory in a trial on the safety of premature infant formula.