Abbott's (ABT) Q3 Earnings Top Estimates, 2022 EPS View Up (Revised)
Abbott Laboratories ABT reported third-quarter 2022 adjusted earnings of $1.15 per share, which exceeded the Zacks Consensus Estimate by 26.4%. The adjusted figure however declined from the prior-year quarter’s levels by 17.9%.
The quarter’s adjustments include certain non-recurring intangible amortization expenses.
GAAP EPS came in at 81 cents, a 30.8% plunge year on year.
Third-quarter worldwide sales of $10.41 billion were down 4.7% year over year on a reported basis. The top line exceeded the Zacks Consensus Estimate by 8.7%.
On an organic basis (excluding the impact of foreign exchange), sales improved 1.3% year over year in the reported quarter.
Quarter in Detail
Abbott operates through four segments — Established Pharmaceuticals, Medical Devices, Nutrition and Diagnostics.
In the third quarter, Established Pharmaceuticals sales improved 4.9% on a reported basis (up 12.2% on an organic basis) to $1.33 billion. Organic sales in key emerging markets improved 13% year over year. According to Abbott, organic sales improvement was backed by strong growth in several geographies, including India, China, Brazil and Vietnam and several therapeutic areas, including cardiometabolic, gastroenterology and central nervous system/pain management.
Medical Devices business sales dropped 0.5% on a reported basis (up 6.4% on an organic basis) to $3.62 billion. U.S. Sales growth was led by strong double-digit growth in Electrophysiology, Structural Heart and Diabetes Care. Internationally, sales growth was negatively impacted by intermittent COVID-19 lockdown restrictions in China as well as supply constraints in certain areas, most notably Electrophysiology.
Diabetes Care reported organic growth of 12.9% year over year, led by FreeStyle Libre, which contributed $1.0 billion of revenues in the reported quarter. Heart Failure sales improved 2.3% organically. Meanwhile, the Rhythm Management business recorded an organic sales decline of 0.8% in the quarter under review. Electrophysiology and Structural Heart recorded organic growth of 3.8% and 15.1%, respectively, in the quarter under review.
Nutrition sales were down 14.9% year over year on a reported basis (down 10.3% on an organic basis) to $1.79 billion. Pediatric Nutrition sales registered a 22% slump on an organic basis. The downside can be attributed to a manufacturing shutdown in February of certain infant formula products manufactured at Abbott's Sturgis, MI, facility. International Pediatric sales were negatively impacted by challenging market conditions in China.
Adult Nutrition sales improved 2.4% organically. Per the company, Adult Nutrition sales benefited from improved sales performance of Abbott's complete and balanced nutrition brand, Ensure globally.
Diagnostics sales were down 6.2% year over year on a reported basis (down 0.6% on an organic basis) to $3.67 billion. Core Laboratory Diagnostics sales were up 2.2% organically. Meanwhile, Molecular Diagnostics declined 44.3% on an organic basis. Rapid Diagnostics sales rose 4.9% on an organic basis, whereas Point of Care Diagnostics sales fell 4% organically.
Margins
Gross profit for the reported quarter fell 11.1% year over year to $5.78 billion. Gross margin contracted 399 basis points (bps) to 55.5%.
Selling, general and administrative expenses were down 1.3% year over year to $2.73 billion. Research and development expenses rose 16.4% year over year to $782 million.
The company reported an adjusted operating profit of $2.27 billion for the quarter under review, down 26% year over year. Adjusted operating margin, too, contracted 627 bps to 21.8%.
2022 Guidance
Abbott has raised its 2022 EPS guidance.
Full-year adjusted earnings (excluding specified items of $1.42 per share) are expected to be in the range of $5.17 to $5.23 (compared with the earlier guidance of at least $4.90). The current Zacks Consensus Estimate is pegged at $5.00.
Our Take
Abbott exited the third quarter of 2022 with better-than-expected earnings and revenues. However, the figures declined on a year-over-year basis.Total sales in the third quarter were negatively impacted by COVID-19 testing-related sales decline and a manufacturing stoppage initiated in February of certain infant formula products manufactured at Abbott's Sturgis, MI, facility.
Excluding these negative factors, total worldwide sales increased 6% on an organic basis in the third quarter, benefitting from robust organic sales growth across the company’s core Established Pharmaceuticals andMedical Devices segments.
Meanwhile, the Diabetes Care business continued to benefit from the growing sales of its flagship, sensor-based continuous glucose monitoring system, FreeStyle Libre.
The raised 2022 guidance buoys optimism.
Zacks Rank and Upcoming Releases
Abbott currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Charles River Laboratories International CRL will release third-quarter 2022 results on Nov 2.
Charles River has a long-term historical earnings growth rate of 17.7%. Charles River’s earnings yield of 5.47% compares favorably with the industry’s -2.84%.
McKesson MCK is scheduled to release third-quarter 2022 results on Nov 1.
McKesson’s long-term historical earnings growth rate is estimated at 14.2%. MCK’s earnings yield of 6.94% compares favorably with the industry’s 5.22%.
Humana HUM is slated to release third-quarter 2022 results on Nov 2.
Humana’s long-term historical earnings growth rate is estimated at 16.2%. HUM’s earnings yield of 5.02% compares favorably with the industry’s 5.00%.
(We are reissuing this article to correct a mistake. The original article, issued on October 19, 2022, should no longer be relied upon.)
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