U.S. Markets open in 2 hrs 55 mins

Abbott (ABT) Q4 Earnings Meet Estimates, Organic Growth Solid

Zacks Equity Research

Abbott Laboratories ABT reported fourth-quarter 2018 adjusted earnings from continuing operations of 81 cents per share, in line with the Zacks Consensus Estimate. The bottom line improved 9.5% year over year and fell within the company’s guided range of 80-82 cents. Reported earnings from continuing operation in the quarter came in at 37 cents against the year-ago loss of 48 cents per share.

Full-year adjusted EPS was $2.88, a 15.2% improvement from the year-ago period. However, it missed the Zacks Consensus Estimate by a penny.

Fourth-quarter worldwide sales came in at $7.77 billion, up 2.3% year over year on a reported basis. The top line remained slightly below the Zacks Consensus Estimate of $7.79 billion.

On an organic basis (adjusting for the impact of foreign exchange as well as certain acquisitions and divestments), sales increased 6.4% year over year in the reported quarter.

For 2018, sales were $30.6 billion, up 11.6% on a reported basis and up 7.3% on an organic basis from 2017. The top line remained in line with the Zacks Consensus Estimate.

Quarter in Detail

Abbott operates through four segments, namely Established Pharmaceuticals Division (EPD), Medical Devices, Nutrition and Diagnostics.

Abbott Laboratories Price, Consensus and EPS Surprise

Abbott Laboratories Price, Consensus and EPS Surprise | Abbott Laboratories Quote

In the fourth quarter, EPD sales dropped 4.8% on a reported basis (improved 3.6% on an organic basis) to $1.09 billion. This included an 8.4% adverse impact from currency fluctuations. Sales in the key emerging markets declined 6.2% year over year on a 10.5% adverse impact of foreign exchange. Organically, sales improved 4.3% in this market.

The Medical Devices business sales increased 6.7% on a reported basis to $2.92 billion. On an organic basis, sales grew 9%.

Cardiovascular and Neuromodulation sales reportedly (up 4.8% on an organic basis) rose 6.7% on double-digit growth in Electrophysiology and Structural Heart.In Electrophysiology, growth was led by strong performance in cardiac mapping and ablation catheters. Within Structural Heart, growth was driven by several product areas across Abbott's broad portfolio, including AMPLATZERPFO Occluder and MitraClip.

Diabetes Care sales improved 28.3% (up 32.4% organically), buoyed consistent consumer uptake of FreeStyle Libre, the revolutionary continuous glucose monitoring system of Abbott.

Nutrition sales were down 0.4% year over year on a reported basis (up 3.6% on an organic basis) to $1.78 billion. Pediatric Nutrition sales increased 3.7% on an organic basis. Adult Nutrition sales were up 3.5% organically.

Diagnostics sales were up 2.9% year over year on a reported basis (up 7.4% on a comparable operational basis) to $1.96 billion. Core Laboratory Diagnostics sales grew 9.4% while Point of Care Diagnostics slipped 5.1%, on an organic basis. Molecular Diagnostics sales were up 3.8% banking on strong growth in the infectious disease testing business. Rapid Diagnostics recorded sales of $548 million, driven by solid contributions from cardiometabolic testing.

2019 Guidance

Abbott has initiated its 2019 guidance.

Adjusting for certain net specified items for the full year, adjusted earnings from continuing operations are expected in the band of $3.15-$3.25. The Zacks Consensus Estimate of $3.19 remains within this projected range. Organic sales growth is expected in the range of 6.5% -7.5%. The Zacks Consensensus Estimate for the top line is pegged at $32.03 billion.

The company has also provided first-quarter 2019 adjusted earnings per share outlook. It expects to report adjusted earnings from continuing operations in the range of 60-62 cents. The consensus mark of 66 cents falls outside the predicted range.

Our Take

Abbott exited the fourth quarter on a mixed note with earnings in line with the Zacks Consensus Estimate and revenues missing the mark on a close margin. Increasing currency headwinds to some extent dented the company’s international performance.

Overall, we are optimistic about Abbott’s strong and consistent EPD and Medical Devices performance organically. Particularly, Abbott has been riding high on a healthy growth within its Diabetes Care business. The company has been hogging the limelight for developments in the flagship, sensor-based continuous glucose monitoring (CGM) system — FreeStyle Libre System. Also, solid contributions from the company’s other two businesses encourage us.

Meanwhile, the company’s emerging market performance has been extremely promising on several strategic developments.

Zacks Rank & Key Picks

Abbott currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical space are BioTelemetry, Inc. BEAT, ABIOMED, Inc. ABMD and DexCom, Inc. DXCM.

BioTelemetry is expected to release fourth-quarter 2018 results on Feb 28. The Zacks Consensus Estimate for the period’s adjusted EPS is 42 cents and for revenues, $103.02 million. The stock sports a Zacks Rank #1 (Strong Buy).

ABIOMED is expected to release fourth-quarter fiscal 2018 results on Jan 31. The Zacks Consensus Estimate for the quarter’s adjusted EPS is pegged at 94 cents and for revenues stands at $214 million. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DexCom is slated to release fourth-quarter 2018 results on Jan 26. The Zacks Consensus Estimate for adjusted EPS for the to-be-reported quarter is 14 cents and for the top line, $330.5 million. The stock carries a Zacks Rank of 2.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Abbott Laboratories (ABT) : Free Stock Analysis Report
ABIOMED, Inc. (ABMD) : Free Stock Analysis Report
DexCom, Inc. (DXCM) : Free Stock Analysis Report
BioTelemetry, Inc. (BEAT) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research