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Here's Why You Should Retain Abbott (ABT) Stock For Now

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·4 min read
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Abbott Laboratories ABT is well poised for growth in the coming quarters, backed by its solid diagnostics business. A solid fourth-quarter 2021 performance, along with its progress with the diabetes business, is expected to contribute further. However, forex woes and tensions in China persist.

Over the past year, this Zacks Rank #3 (Hold) stock has gained 2.9% against 17.9% fall of the industry. The S&P 500 composite rose 15.5% in the same time frame.

The renowned provider of a diversified line of healthcare products has a market capitalization of $230.74 billion. The company projects 10.5% growth for the next five years and expects to maintain its strong performance. Abbott’s earnings surpassed estimates in three of the trailing four quarters and missed the same in the other one, the average surprise being 19.8%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Let’s delve deeper.

Solid Diagnostics Portfolio: We are upbeat about Abbott’s continued strength in its Diagnostics business. With the spike in Omicron variant cases, particularly in the United States, demand for testing has increased significantly. In the fourth quarter of 2021, the company sold nearly 300 million COVID tests globally and delivered one billion tests in 2021. COVID testing sales in the fourth quarter with rapid testing platforms, including BinaxNOW in the United States, Panbio internationally, and ID NOW globally, comprised approximately 90% of those sales. Excluding COVID testing sales, worldwide diagnostic sales improved both in the fourth quarter and for the year. In 2021, the company placed more than 3,000 Alinity instruments for immunoassay and clinical chemistry testing, with approximately two-thirds of those placements coming from share capture.

Progress With Diabetes Business: We are optimistic about Abbott’s diabetes business. This business achieved organic sales growth in the fourth quarter of 2021 led by strong growth in FreeStyle Libre. In a relatively short time span, Libre has achieved global leadership among continuous glucose monitoring (“CGM”) systems for both Type 1 and Type 2 users. In 2020, the company received U.S. approval of Freestyle Libre 2 (an integrated CGM or iCGM system for adults and children) and CE Mark for Libre 3 and Libre Sense Glucose Sport.

Strong Q4 Results: Abbott’s better-than-expected fourth-quarter 2021 results buoy optimism. The company recorded year-over-year improvement in revenues. Abbott registered organic sales growth across all of its operating segments in the quarter. COVID-19 testing-related sales were driven by demand for BinaxNOW, Panbio and ID NOW rapid testing platforms. Within Adult Nutrition, the company gained from the strong performance of the Ensure and Glucerna brands.

Downsides

Tension in China Continues: Abbott, which is trying to expand its nutrition business in emerging markets, is facing weaknesses in Greater China on challenging market dynamics. Especially in pediatric nutrition, the company is apprehensive about the new food safety regulations and a consequent oversupply of products in the market. Outside of China, the company is witnessing soft market conditions across a few international markets. This may continue hurting the top line in the upcoming quarter as well.

Forex Woes: Foreign exchange is a major headwind for Abbott due to a considerable percentage of its revenues coming from outside the United States. The strengthening of the Euro and some other developed markets’ currencies has been constantly hampering the company’s performance in the international markets.

Estimate Trend

Abbott has been witnessing a positive estimate revision trend for 2022. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 2.9% north to $4.82.

The Zacks Consensus Estimate for the company’s first-quarter 2022 revenues is pegged at $10.76 billion, suggesting a 2.9% uptick from the year-ago quarter’s reported number.

Key Picks

A few stocks from the broader medical space that investors can consider are AMN Healthcare Services, Inc. AMN, Allscripts Healthcare Solutions, Inc. MDRX and Henry Schein, Inc. HSIC.

AMN Healthcare has an estimated long-term growth rate of 16.2%. AMN’s earnings surpassed estimates in the trailing four quarters, the average surprise being 19.5%. It currently has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AMN Healthcare has gained 36.1% against the industry’s 59.9% fall over the past year.

Allscripts, carrying a Zacks Rank #2, has an estimated long-term growth rate of 11.1%. MDRX’s earnings surpassed estimates in the trailing four quarters, the average surprise being 34.1%.

Allscripts has gained 25.2% against the industry’s 55.7% fall over the past year.

Henry Schein has an estimated long-term growth rate of 11.8%. HSIC’s earnings surpassed estimates in the trailing four quarters, the average surprise being 21.9%. It currently carries a Zacks Rank #2.

Henry Schein has gained 9.9% compared with the industry’s 7% rise over the past year.


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Abbott Laboratories (ABT) : Free Stock Analysis Report

Allscripts Healthcare Solutions, Inc. (MDRX) : Free Stock Analysis Report

Henry Schein, Inc. (HSIC) : Free Stock Analysis Report

AMN Healthcare Services Inc (AMN) : Free Stock Analysis Report

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