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Demand for Nutrition Line to Drive Abbott (ABT) Q1 Earnings

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Zacks Equity Research
·6 min read
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Abbott Laboratories ABT is slated to report first-quarter 2021 results on Apr 20, before market open.

In the last reported quarter, the company delivered an earnings surprise of 6.62%. Over the trailing four quarters, its earnings have exceeded the Zacks Consensus Estimate on each occasion, the average surprise being 16.56%.

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, 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, have been catching up pace backed by a continued strong cadence of new product introductions.

With the emergence of the new virus strains, the number of new cases did not subside through the first quarter. However, just like the past two quarters, we expect procedure volume across all core consumer-facing businesses to have witnessed continued improvement through the months of the first quarter. This uptrend is likely to have majorly contributed to the company’s first-quarter performance.

Abbott has been making significant strides within its Diagnostics business in the wake of the coronavirus outbreak. In this regard we note that the biggest contribution in the fourth quarter came from rapid lateral flow test to detect the virus, which includes BinaxNOW in the United States and Panbio internationally.

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

The company’s collaboration deal with the U.S. government to supply 150 million of its $5 rapid antigen test BinaxNOW successfully got completed in the first quarter. Accordingly, we expect this to translate into significant revenue contribution in the diagnostics business.

Further, as planned, in this quarter, the company received FDA’s regulatory go-ahead for its over-the-counter BinaxNOW Rapid Antigen Self Test. The company had earlier stated that its self-funded investment in U.S. manufacturing capacity will make tens of millions of BinaxNOW tests available per month for direct purchase to organizations including schools, workplaces and pharmacies. This latest development, in line with this, is expected to have contributed to the to-be-reported quarter’s top line.

Internationally, the company’s Panbio COVID-19 Ag Rapid Test Device sale is gaining strong momentum over the past few months on extensive global rollout. Added to this, in January 2021, the company received two additional regulatory approvals in Europe on Panbio for asymptomatic screening and self-administered sample collection. This is expected to have widened the company’s global Panbio customer base through the first quarter.

The Zacks Consensus Estimate of $4.33 billion for Diagnostic revenues suggests a 137.3% surge from the figure reported in the comparable quarter last year.

Within Established Pharmaceuticals Division (EPD), despite a tepid sales environment, the company has been witnessing visible signs of a rebound, reflecting sequential improvement based on stable business model. Per the company’s February update, new product launches across key emerging markets boosted the the EPD business. The company had forecast improvement in demand EPD product line through the months of 2021. This should get reflected in the first-quarter results.

Overall, the Zacks Consensus Estimate of $1.10 billion for EPD revenues suggests a 5.3% rise 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 early December, Abbott strengthened its diabetes care portfolio with its next-generation, sensor-based glucose monitoring technology with FreeStyle Libre 2 system securing Canada’s nod for use in adults and children (4 and older) with diabetes. This is expected to have provided a full-quarter contribution to the company’s Diabetes Care arm this time around.

Toward 2020 end, Libre 2 was launched in the United States. Around the same time, the company obtained European approval for Libre 3. These two developments are expected to have led to full-quarter contributions to the company’s Diabetes Care business top line in the first 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 $935 million for Diabetes care business revenues suggests a 24.3% 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 last-reported quarter, within adult nutrition, the company registered strong U.S. and international growth of Ensure (adult complete and balanced nutrition brand) and Glucerna (diabetes nutrition brand). In pediatric nutrition, despite challenging conditions in Greater China, sales were driven by the global growth of Similac infant formula brand. This trend might have continued in the first quarter as well, with the global situation remaining more-or-less unchanged.

Overall, the Zacks Consensus Estimate of $2 billion for Nutrition business revenues suggests a 5.1% rise from the figure reported in the comparable quarter last year.

Estimates

For first-quarter 2021, the Zacks Consensus Estimate for total revenues of $10.84 billion indicates 40.3% rise from the prior-year quarter’s reported figure. The consensus mark for earnings is pegged at $1.33, indicating 104.6% decline year on year.

Earnings Whispers

Per our proven model, a stock with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has higher chances of beating estimates. That is not the case here as you can see:

Earnings ESP: Abbott has an Earnings ESP of -5.44%. 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 #3.

Stocks Worth a Look

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

Elanco Animal Health Incorporated ELAN currently has a Zacks Rank #2 and an Earnings ESP of +0.73%. You can see the complete list of today’s Zacks #1 Rank stocks here.

HCA Healthcare, Inc. HCA has an Earnings ESP of +6.97% and a Zacks Rank of 2, at present.

Avenue Therapeutics, Inc. ATXI has an Earnings ESP of +16.67% and a Zacks Rank of 2, at present.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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Abbott Laboratories (ABT) : Free Stock Analysis Report

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Avenue Therapeutics, Inc. (ATXI) : Free Stock Analysis Report

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