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COVID-19 Antigen Test Launch to Drive Abbott (ABT) Q3 Earnings

Zacks Equity Research
·5 min read

Abbott Laboratories ABT is slated to report third-quarter 2020 results on Sep 21, before market open.

In the last reported quarter, the company reported an earnings surprise of 32.56%. Over the trailing four quarters, its earnings have been in line with the Zacks Consensus Estimate on two occasions and exceeded the same in the other two, the average surprise being 12.69%.

Let's see how things have shaped up prior to this announcement.

Factors at Play

Despite shelter-in-place restrictions across many of its prime business regions, which led to the postponement of elective medical procedures, over the past few months, Abbott has been seeing improvements in both testing and procedure volumes across its hospital-based businesses. At the same time, the company’s consumer-facing businesses, which include diabetes care, nutrition and established pharmaceuticals, are catching up pace following an initial hiccup witnessed during the first few months of the pandemic.This uptrend is likely to have majorly contributed to the company’s third-quarter results.

Abbott Laboratories Price and EPS Surprise

Abbott Laboratories Price and EPS Surprise
Abbott Laboratories Price and EPS Surprise

Abbott Laboratories price-eps-surprise | Abbott Laboratories Quote

Abbott has been making significant strides within its Diagnostics business in the wake of the coronavirus outbreak. In August, the government purchased 150 million of Abbott’s $5 rapid antigen tests for COVID-19. Not just this, the company has also developed and launched its COVID-19 molecular diagnostics and serology tests across its testing platform for both laboratory and rapid point-of-care settings. All tests got significant market acceptance globally.

These are expected to have made full-quarter contributions to the company’s global Diagnostics business’ third-quarter revenues.

However, the Zacks Consensus Estimate of $2.38 billion for Diagnostic revenues suggests a 24.5% decline from the figure reported in the comparable quarter last year.

We expect revenues to have improved in the company’s Diabetes Care business as it has been on a substantially strong growth trajectory in recent times. Abbott has been in the limelight for developments in its flagship, sensor-based continuous glucose monitoring system, widely known as the FreeStyle Libre System. In the second quarter, this business registered 30% growth backed by FreeStyle Libre, which recorded a year-over-year surge of 40%, organically, in global sales. In June, Abbott strengthened its diabetes care portfolio with the FDA approval of FreeStyle Libre 2 as an integrated continuous glucose monitoring (iCGM) system for adults and children. This is expected to have provided a strong quarterly contribution to the company’s Diabetes Care arm in the third quarter.

Nevertheless, this business, having a strong global setup, might have been affected by the supply-chain disruption worldwide during the period under discussion.

Overall, the Zacks Consensus Estimate of $800 million for Diabetes care business revenues suggests a 20.3% rise from the figure reported in the comparable quarter last year.

The company’s Nutrition business, which includes a broad range of pediatric and adult nutritional products, might have gained strength on increased demand for its products addressing the worldwide health hazard. Notably, in the second quarter, within adult nutrition, the company registered strong U.S. and international growth of Ensure, the market-leading complete and balanced nutrition brand. This has led to global adult nutrition growth of around 7.5%. In pediatric nutrition, despite challenging conditions in Greater China, sales were driven by the global growth of Pediasure and Pedialyte, the company’s oral rehydration brand. This trend might have continued in the third quarter as well, with the global situation remaining unchanged.

Estimates

For third-quarter 2020, the Zacks Consensus Estimate for total revenues of $8.46 billion indicates a 4.7% rise from the prior-year quarter’s reported figure. Also, the consensus mark for earnings is pegged at 90 cents, indicating a 7.1% fall year on year.

Earnings Whispers

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, has higher chances of beating estimates. This is exactly the case here as you can see:

Earnings ESP: Abbott has an Earnings ESP of +5.30%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: It currently carries a Zacks Rank #2.

Other Stocks Worth a Look

Here are a few medical stocks worth considering, as these too have the right combination of elements to beat on earnings this reporting cycle.

Humana Inc. HUM currently has a Zacks Rank #2 and an Earnings ESP of +3.35%. The company is scheduled to report third-quarter 2020 earnings on Nov 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

DaVita Inc. DVA has an Earnings ESP of +2.88% and a Zacks Rank of 1, at present. The company is slated to release third-quarter 2020 numbers on Nov 3.

LHC Group LHCG has an Earnings ESP of +1.85% and a Zacks Rank of 2, at present. The company is slated to release third-quarter 2020 numbers on Nov 4.

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