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Abbott (ABT) Up 2.1% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Abbott (ABT). Shares have added about 2.1% in that time frame, underperforming 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 Q3 Earnings, Reports Strong Segmental Sales

Abbott reported third-quarter 2019 adjusted earnings from continuing operations of 84 cents per share, in line with the Zacks Consensus Estimate. The bottom line improved 12% from the prior-year quarter. Reported earnings from continuing operations came in at 53 cents, showing a 70.9% surge from the year-ago quarter.

Third-quarter worldwide sales came in at $8.08 billion, up 5.5% year over year on a reported basis. The top line missed the Zacks Consensus Estimate by 0.2%.

On an organic basis (adjusting for the impact of foreign exchange along with the prior year first, second and third-quarter results for a non-core business within U.S. Adult Nutrition), sales increased 7.6% 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.

In the third quarter, EPD sales rose 4.4% on a reported basis (improved 7.9% on an organic basis) to $1.21 billion. This included a 3.5% adverse impact from currency fluctuations. Sales in the key emerging markets rose 2.8% year over year, excluding an adverse 4% impact of foreign exchange. Organically, sales climbed 6.8% in this market.

Medical Devices business sales increased 8.9% on a reported basis to $3.07 billion. On an organic basis, sales grew 10.6%. Double-digit growth in Electrophysiology, Heart Failure, Structural Heart and Diabetes Care contributed to the rise.

Cardiovascular and Neuromodulation sales reportedly (up 5.6% on an organic basis) rose 4.2%.

In Electrophysiology, growth was led by solid performance by cardiac diagnostic and ablation catheters.

Heart Failure sales growth was 23.2% organically, driven by strong market adoption of Abbott's HeartMate 3 left ventricular assist device following its FDA approval as a destination therapy in late 2018.

Within Structural Heart, the company registered 16% organic growth on a year-over-year basis driven by Abbott's MitraClip device.

Diabetes Care sales improved 29.6% (up 33.1% organically), buoyed by consistent consumer uptake of FreeStyle Libre, the revolutionary continuous glucose monitoring system of Abbott.

Nutrition sales were up a marginal 2% year over year on a reported basis (up 3.8% on an organic basis) to $1.87 billion. Pediatric Nutrition sales increased 1.4% on an organic basis. Adult Nutrition sales were up 6.9% organically.

Diagnostics sales were up 4.7% year over year on a reported basis (up 6.6% on an organic basis) to $1.91 billion. Core Laboratory Diagnostics sales grew 10.6% on an organic basis led by solid growth in the United States and international markets. Molecular Diagnostics slipped 6.4%, on an organic basis. Point of Care Diagnostics sales were up 6.7% on an organic basis led by the company’s i-STAT handheld system in the United States and internationally. Rapid Diagnostics sales improved 0.8% on an organic basis in the third quarter led by infectious disease testing in developed markets and cardio-metabolic testing globally.

2019 Guidance

For the full year, adjusted earnings from continuing operations have been lowered to a new band of $3.23 to $3.25 from the earlier $3.21-$3.27. The Zacks Consensus Estimate of $3.24 lies within this projected range.

The company has also issued the fourth-quarter 2019 adjusted earnings per share outlook. It expects to report adjusted earnings from continuing operations in the range of 94-96 cents. The consensus mark of 94 cents falls within the predicted range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Abbott has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, 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 C. 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 this revision has been net zero. Notably, 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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