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Why Abbott (ABT) Might be Well Poised for a Surge

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Zacks Equity Research
·2 min read
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Investors might want to bet on Abbott (ABT), as earnings estimates for this company have been showing solid improvement lately. The stock has already gained solid short-term price momentum, and this trend might continue with its still improving earnings outlook.

The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this maker of infant formula, medical devices and drugs, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For Abbott, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The company is expected to earn $1.34 per share for the current quarter, which represents a year-over-year change of +106.15%.

The Zacks Consensus Estimate for Abbott has increased 25% over the last 30 days, as five estimates have gone higher compared to no negative revisions.

Current-Year Estimate Revisions

For the full year, the company is expected to earn $5.07 per share, representing a year-over-year change of +38.9%.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for Abbott. Over the past month, 10 estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 15.63%.

Favorable Zacks Rank

The promising estimate revisions have helped Abbott earn a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

While strong estimate revisions for Abbott have attracted decent investments and pushed the stock 12.9% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.


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Zacks Investment Research