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Why Is Abbott (ABT) Up 1% Since Last Earnings Report?

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Zacks Equity Research
·4 min read
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A month has gone by since the last earnings report for Abbott (ABT). Shares have added about 1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Abbott due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Abbott Posts Q4 Earnings and Revenues Beat

Abbott reported fourth-quarter 2020 adjusted earnings from continuing operations of $1.45 per share, which exceeded the Zacks Consensus Estimate by 6.6%. The adjusted figure improved 52.6% from the prior-year quarter.

The quarter’s adjustments include certain non-recurring intangible amortization expense and other expense primarily associated with acquisitions and restructuring actions among others.

Reported earnings from continuing operations came in at $1.20, reflecting 103.4% rise year on year.

Full-year adjusted earnings per share was $3.65, a 12.7% improvement from the year-ago period. This exceeded the company provided adjusted earnings per share guidance of at least $3.55 for 2020 as well as the Zacks Consensus Estimate of $3.57 per share.

Fourth-quarter worldwide sales of $10.7 billion were up 28.7% year over year on a reported basis. The top line surpassed the Zacks Consensus Estimate by 7.9%. On an organic basis (adjusting for the impact of foreign exchange), sales improved 28.4% year over year in the reported quarter.

For 2020, worldwide revenues were $34.61 billion, up 8.5% on a reported basis and up 9.8% organically from the year-ago period. This too exceeded the Zacks Consensus Estimate of $33.83 billion.

Quarter in Detail

Abbott operates through four segments — EPD, Medical Devices, Nutrition, and Diagnostics.

In the fourth quarter, EPD sales declined 2.3% on a reported basis (up 3.4% on an organic basis) to $1.15 billion. Organic sales in key emerging markets improved 1.1%, year over year. According to Abbott, organic sales growth in India, Russia and Brazil were partially offset by market softness across several countries as a result of COVID-19.

Medical Devices business sales improved 1.7% on a reported basis to $3.26 billion. On an organic basis, sales declined 0.4%. Barring Diabetes Care, all other sub segments reported organic revenues decline in the quarter.

Diabetes Carereported organic growth of 29% led by FreeStyle Libre, which grew 41.3% on a reported basis and 37.1% on an organic basis. However, poor cardiovascular and neuromodulation procedure volumes and lower Vascular sales in China, as a result of a new national tender program in that country impacted the overall performance of Medical Devices arm.

Nutrition sales were up 3.6% year over year on a reported basis (up 4.4% on an organic basis) to $1.94 billion. Pediatric Nutrition sales declined 2.2% on an organic basis. Adult Nutrition sales improved 12.7% organically. According to the company, Adult Nutrition sales benefited from improved sales performance of Abbott's complete and balanced nutrition brandEnsure and diabetes nutrition brand Glucerna.

In Pediatric Nutrition, however, U.S. growth of itsinfant formula brand,Similacwas offset by challenging conditions in Greater China.

Diagnostics sales were up 111.1%, year over year on a reported basis (up 108.9% on an organic basis) to $4.35 billion. Core Laboratory Diagnostics sales were up 5.1% on an organic basis. Molecular Diagnostics surged 308.3% on an organic basis. Rapid Diagnostics sales too improved 329% on an organic basis in the December-end quarter. However, Point of Care Diagnostics sales declined 6% on an organic basis.

2021 Guidance

The company provided its earnings guidance for 2021.

The company now projects adjusted earnings per share from continuing operations to be at least $5 for 2021. The current Zacks Consensus Estimate is pegged at $4.38.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 25% due to these changes.

VGM Scores

At this time, Abbott has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Abbott has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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