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Bear of the Day: Abbott (ABT)

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Abbott (ABT) has lowered full year earnings guidance as fewer Americans need COVID tests. This Zacks Rank #5 (Strong Sell) is still expected to grow earnings by 21% in 2021.

Abbott is a global healthcare company. It operates in diagnostics, medical devices, nutritionals and branded generic medicines.

The company serves customers in more than 160 countries.

Lowered Full Year Guidance

On June 1, Abbott lowered its full year 2021 guidance due to the significantly lower COVID-19 diagnostic testing demand, which is expected to continue to slow.

The reduction in testing has been driven by lower number of cases in the U.S. and other major developed countries, accelerated rollout of the COVID-19 vaccines and U.S. health authority guidance on testing for fully vaccinated individuals.

As a result, the company is seeing a sudden slowing in market demand for COVID-19 testing, particularly for surveillance and screening with rapid testing.

It has lowered its full year 2021 EPS guidance to a range of $4.30 to $4.50.

It had been selling 12 COVID-19 tests globally during the pandemic.

Analysts Cut Full Year Estimates

It's good news that fewer people need to take rapid COVID tests. But for the diagnostic companies, it means a hit to earnings.

9 analysts have lowered 2021 earnings estimates since Abbott lowered its guidance.

That has pushed the Zacks Consensus down to $4.42 from $5.05. The $4.42 is within the company's guidance range.

It still means the company is growing its earnings at 21% over 2020, as it only made $3.65 last year.

Buying Opportunity?

Abbott shares had been at 5-year highs but have sunk 7.3% in the last 3 months.

They're up just 2% year-to-date.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Is this a buying opportunity?

Shares are still pricey, with a forward P/E of 25.1.

But it's expected to grow revenue by 14.5% this year.

Abbott is shareholder friendly, with a dividend yielding 1.6%.

For those interested in a global healthcare company with growth, Abbott might be one to keep on the watch list for changes in the Rank.

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