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Abbott (ABT) Scales to a 52-Week High: What's Driving It?

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·4 min read
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Abbott Laboratories ABT scaled a new 52-week high of $142.60 on Dec 27, before closing the session marginally lower at $141.46.

The company’s shares have charted a solid trajectory in recent times, appreciating 30.6% over the past year versus the 5.3% decline of the industry it belongs to and 27.3% surge of the S&P 500 composite.

Over the past five years, the company registered earnings growth of 10.5%, which is way ahead of the industry’s 7% rise. The company’s long-term expected growth rate of 12% compares with the industry’s growth projection of 17.6%.

Abbott delivered an outstanding performance in the third quarter of 2021 with strong organic sales growth across each operating segment, barring Neuromodulation. Diagnostics sales were strong on the growing COVID-19 case count in the third quarter. Diabetes Care sales were also strong on solid worldwide adoption of FreeStyle Libre.

Let’s delve deeper.

Key Drivers

Q3 Upsides: Abbott posted better-than-expected earnings and revenue numbers for the third quarter of 2021. Overall, year-over-year improvements were robust. Excluding COVID-19 testing-related sales, which totaled $1.9 billion in the quarter, organic sales increased 12% year over year. A major point of encouragement, even though COVID-19 case rates surged in the United States and other geographies during the third quarter, the company registered strong growth in its more consumer-facing businesses like nutrition, established pharmaceuticals and diabetes care. This mitigated the modest impacts of the pandemic that Abbott witnessed from the surge in cases in certain areas of its hospital base businesses.

Diagnostics Grows Amid Pandemic: Diagnostics sales increased more than 45% (up 12.5% excluding COVID testing-related sales). With the spike in Delta variant cases, particularly in the United States, demand for testing increased significantly, most notably for rapid tests. In the third quarter, the company sold more than 225 million COVID-19 tests globally and shipped over 1 billion tests since the pandemic's start. Over the past several months, Abbott has established a global leadership position in rapid testing, including a supply capacity of more than 100 million tests per month.

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Progress in Diabetes Business: This business achieved growth of 30.6% in the third quarter of 2021, led by strong growth in FreeStyle Libre and Libre Sense, representing 41.6% of organic sales growth in the quarter. FreeStyle Libre sales were nearly $1 billion and in the quarter, the company added more than 200,000 new users, bringing the total global user base for Libre to well over 3.5 million users.

Downsides

Prominent Coronavirus Impact: Abbott noted modest impacts on its base business with a spike in new COVID-19 case count through the third quarter. More specifically, some softness was seen as Delta variant spread and new cases increased in the United States, particularly more in August and throughout half of September. This led to a slowdown in the company’s hospital base business in certain areas.

Foreign Exchange Translation Impacts Sales: Foreign exchange is a major headwind for Abbott as a considerable percentage of its revenues come from outside the United States. The strengthening of the Euro and some other developed market currencies has constantly been hampering the company’s performance in international markets.

Zacks Rank & Other Key Picks

Abbott currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Few other similar-ranked stocks in the broader medical space include Thermo Fisher Scientific Inc. TMO, McKesson Corporation MCK and NextGen Healthcare, Inc. NXGN, each carrying a Zacks Rank #2.

Thermo Fisher surpassed earnings estimates in each of the trailing four quarters, the average surprise being 9.02%.

Thermo Fisher’s long-term earnings growth rate is estimated at 14%. The company’s earnings yield of 3.7% compares favorably with the industry’s (3.6%).

McKesson beat earnings estimates in each of the trailing four quarters, the average surprise being 19.9%.

McKesson’s long-term earnings growth rate is estimated at 8.9%. The company’s earnings yield of 9.9% compares favorably with the industry’s 3.2%.

NextGen Healthcare surpassed earnings estimates in each of the trailing four quarters, the average surprise being 16%.

NextGen Healthcare’s long-term earnings growth rate is estimated at 8.5%. The company’s earnings yield of 5.9% compares favorably with the industry’s (4.1%).


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Abbott Laboratories (ABT) : Free Stock Analysis Report

Thermo Fisher Scientific Inc. (TMO) : Free Stock Analysis Report

McKesson Corporation (MCK) : Free Stock Analysis Report

NEXTGEN HEALTHCARE, INC (NXGN) : Free Stock Analysis Report

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