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Abbott (ABT) Medical Devices Arm Gains Traction, FX Woe Stays

Abbott Laboratories ABT is well poised for growth in the coming quarters, backed by its progress in the diabetes business. Yet, the business environment continues to be challenging. Slow growth in the nutrition business continues to dampen the top line. Abbott currently carries a Zacks Rank #3 (Hold).

Over the past year, Abbott has been outperforming the industry it belongs to. The stock has gained 4.1% against the industry’s 25.1% fall. The company posted better-than-expected earnings and revenue numbers for the first quarter of 2022. Overall, year-over-year improvements were robust. Barring Nutrition, the company registered organic sales growth across all its core operating segments. Organic sales increased 17.5% in the quarter, led by double-digit growth in medical devices, EPD as well as diagnostics, both with and without COVID testing-related sales.

Within EPD, Abbott achieved double-digit organic sales growth led by double-digit growth across several countries and core therapeutic areas, including gastroenterology, respiratory and CNS pain management.

In Diagnostics, in the reported quarter, COVID test sales were $3.3 billion. Excluding COVID testing sales, worldwide diagnostic sales grew over 12% on the successful rollout of the Alinity suite.

Within medical devices, sales grew 11.5% in the quarter led by double-digit growth in diabetes care, structural heart, heart failure and electrophysiology. In diabetes care, sales of FreeStyle Libre grew more than 25% on an organic basis and till the Q1 earnings announcement, the user base reached approximately 4 million users globally.

Abbott Laboratories Price

Abbott Laboratories Price
Abbott Laboratories Price

Abbott Laboratories price | Abbott Laboratories Quote

Within cardiovascular devices, despite the adverse procedure volume-related scenario in Q1 on elevated COVID case rates early in the year, Abbott saw a steady improvement in procedure trends as the case rates came down in the second half of the quarter and the trend continued into April. In terms of product development, the company received FDA approval for Aveir, its leadless pacemaker to treat patients with slow heart rhythms. Added to this, CardioMEMS received an expanded indication in the United States to treat more patients suffering from earlier stages of heart failure. Abbott also received FDA clearance for the latest generation of the company’s EnSite X system, which provides a 360-degree view of the heart for improved cardiac mapping.

Within Nutrition, while the pediatric nutrition business witnessed a drag, the adult nutrition business continued to perform well with global organic sales growth of 11.5%, led by the company’s Ensure and Glucerna brands.

On the flip side, within Abbott’s Nutrition business, worldwide Nutrition sales decreased 7% on a reported basis and 4.4% on an organic basis in the first quarter. During the quarter, sales were negatively impacted by a voluntary recall of certain powder formulas manufactured at one of Abbott's U.S. plants. Accordingly, worldwide Pediatric Nutrition sales decreased 20.6% on a reported basis and 18.8% on an organic basis. Internationally, Pediatric Nutrition sales were unfavorably impacted, primarily by challenging market conditions in China.

Further, during the first half of Q1, for cardiovascular devices, procedure volumes were negatively impacted by elevated COVID case rates. This hampered overall sales growth within this business.

Added to this, in Q1, the U.S. dollar continued to strengthen versus several currencies, which resulted in a more unfavorable impact on sales compared to exchange rates at the time of the Q4 earnings call in January. Abbott reported a 3.7% unfavorable year-over-year impact of foreign exchange in the first quarter.

Key Picks

A few better-ranked stocks in the broader medical space are UnitedHealth Group Incorporated UNH, Medpace Holdings, Inc. MEDP and Alkermes plc ALKS.

UnitedHealth, having a Zacks Rank #2 (Buy), reported first-quarter 2022 earnings per share (EPS) of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 14.2%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.

Medpace reported first-quarter 2022 adjusted EPS of $1.69, which surpassed the Zacks Consensus Estimate by 34.1%. Revenues of $330.9 million outpaced the Zacks Consensus Estimate by 1.1%. It currently has a Zacks Rank #2.

Medpace has a historical growth rate of 27.3%. MEDP’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%.

Alkermes reported first-quarter 2022 adjusted EPS of 12 cents, which surpassed the Zacks Consensus Estimate of a penny. Revenues of $278.6 million outpaced the Zacks Consensus Estimate by 6.2%. It currently sports a Zacks Rank #1.

Alkermes has an estimated long-term growth rate of 25.1%. ALKS’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%.


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