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Abbott (ABT) Down 1.7% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Abbott (ABT). Shares have lost about 1.7% 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's Q1 Earnings and Revenues Beat Estimates

Abbott reported first-quarter 2023 adjusted earnings of $1.03 per share, which exceeded the Zacks Consensus Estimate by 5.1%. The adjusted figure declined from the prior-year quarter’s levels by 40.5%.

The quarter’s adjustments include 28 cents of certain non-recurring items.
GAAP EPS came in at 75 cents, plunging 45.3% year on year.

First-quarter worldwide sales of $9.74 billion were down 18.1% year over year on a reported basis. The top line exceeded the Zacks Consensus Estimate by 1.1%.

On an organic basis (excluding the impact of foreign exchange), sales rose 10.3% year over year in the reported quarter.

Quarter in Detail

Abbott operates through four segments — Established Pharmaceuticals, Medical Devices, Nutrition and Diagnostics.

In the first quarter, Established Pharmaceuticals sales increased 3.7% on a reported basis (up 11.1% on an organic basis) to $1.19 billion. Organic sales in key emerging markets improved 8.3% year over year. According to Abbott, organic sales improvement was backed by growth in Brazil, China and Southeast Asia and across several therapeutic areas, including cardiometabolic, respiratory and central nervous system/pain management.

The Medical Devices business sales rose 8.5% year over year on a reported basis (up 12.4% on an organic basis) at $3.90 billion. Sales growth was led by double-digit organic growth in Diabetes Care, Structural Heart, Heart Failure and Neuromodulation. Several recently launched products and new indications contributed to the strong performance, including Amplatzer Amulet, Navitor, TriClip, Aveir and CardioMEMS.

Diabetes Care reported organic growth of 21% year over year, led by FreeStyle Libre, which contributed $1.2 billion in revenues in the reported quarter. Structural Heart sales rose 16.4% and Heart Failure sales improved 13.6% year over year organically. The Vascular business recorded an organic sales growth of 3.9%% in the quarter under review. Electrophysiology, Rhythm Management and Neuromodulation recorded organic growth of 8.8%, 4% and 11.2%, respectively, in the quarter under review.

Nutrition sales rose 3.8% year over year on a reported basis (up 10.3% on an organic basis) to $1.97 billion. Pediatric Nutrition sales registered an 18.4% growth on an organic basis.

Adult Nutrition sales improved 4.2% organically. Per the company, Adult Nutrition sales benefited from strong sales performance of Abbott's complete and balanced nutrition brand, Ensure, globally.

Diagnostics sales were down 48.9% year over year on a reported basis (down 47.1% on an organic basis) to $2.69 billion. Core Laboratory Diagnostics sales were up 5.1% organically. Molecular Diagnostics declined 64% on an organic basis. Rapid Diagnostics sales declined 64.5% on an organic basis, whereas Point of Care Diagnostics sales rose 5.7% organically.

Margins

Gross profit in the reported quarter fell 21.6% year over year to $5.42 billion. Gross margin contracted 251 basis points (bps) to 55.6%.

Selling, general and administrative expenses were down 0.9% year over year to $2.76 billion. Research and development expenses declined 6.2% year over year to $654 million.

The company reported an adjusted operating profit of $2.00 billion in the quarter under review, down 41.6% year over year. Adjusted operating margin, too, contracted 827 bps to 20.5%.

2023 Guidance

Abbott provided its 2023 Earnings Per Share guidance.

Full-year adjusted earnings (excluding specified items of $1.25 per share) are expected to be in the range of $4.30 to $4.50. The current Zacks Consensus Estimate is pegged at $4.36.

Abbott projects full-year 2023 organic sales growth, excluding COVID-19 testing-related sales, of at least high-single digits and COVID testing-related sales of around $1.5 billion.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Abbott has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. 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 D. 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 #3 (Hold). We expect an in-line return from the stock in the next few months.

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