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For Immediate Release
Chicago, IL – October 14, 2021 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Abbott Laboratories ABT, UnitedHealth Group Inc. UNH, Quest Diagnostics Inc. DGX, and West Pharmaceutical Services, Inc. WST.
Here are highlights from Wednesday’s Analyst Blog:
Growing COVID-19 Testing Demand to Boost Abbott's (ABT) Q3 Earnings
Abbott Laboratories is slated to report third-quarter 2021 results on Oct 20, before market open.
In the last reported quarter, the company posted a negative earnings surprise of 15.84%. Over the trailing four quarters, its earnings have exceeded the Zacks Consensus Estimate on three occasions and missed on one, the average beat being 7.65%.
Let's see how things have shaped up prior to this announcement.
Factors in Play
From May through July, a significant reduction in the number of COVID-19 cases in the United States and other major developed countries accelerated the roll-out of the COVID-19 vaccine globally (with the U.S. health authority’s restrictions for testing on fully-vaccinated individuals), which hurt Abbott’s sales considerably.
In such a situation, Abbott had to lower its 2021 guidance in anticipation of the considerable reduction in the recent and projected COVID-19 Diagnostic testing demand.
However, the later months of the third quarter saw an entire transformation of the scenario — all thanks to the emergence of the more lethal and more contagious Delta variant of COVID-19. Accordingly, like the other industry players, through July to September, the company‘s Diagnostics business is likely to have benefited from the significant surge in the new COVID-19 case count.
As a result, the company is expected to report sequentially stronger diagnostics results in the third quarter.
Within Nutrition, from the beginning of the pandemic til the last reported quarter, Abbott gained consistently in terms of adult nutrition products sales. In the third quarter too, the company is anticipated to have registered stellar U.S. and international growth in Ensure (adult complete and balanced nutrition brand) and Glucerna (diabetes nutrition brand). According to the company, the two factors that are driving the adult nutrition growth rate are — the new users entering the category in this period and the existing customers increasing their usage.
Within pediatric nutrition, the company, however, witnessed a significant lag in sales from the start of the pandemic till April 2021. We note that paediatric healthcare took a backseat through these months as the earlier variants of COVID-19 did not impact child health at all.
Nonetheless, sales improved in the second quarter on a strong demand for Pedialyte, the global rehydration brand of Abbott, driven by the increased investment in direct consumer promotion. With a number of researches coming up on the findings that the new variants of COVID-19 are expected to harm child health more (the still unvaccinated band of the world population), this uptrend within pediatric nutrition is likely to have continued in the third quarter as well.
Abbott’s other consumer facing businesses, which include diabetes care and established pharmaceuticals, have been catching up pace backed by a continued strong cadence of new product instructions. This uptrend is likely to have majorly contributed to the company third-quarter performance.
Within Established Pharmaceuticals Division EPD, the company has been witnessing visible signs of a rebound, reflecting sequential improvement based on its stable business model. New product launches across the key emerging markets have been majorly boosting the EPD business in the recent months.
The performance in the third quarter is likely to have been driven by growth in India and Brazil, apart from the United States where the COVID-19 cases have been shooting up. The business is anticipated to have grown in these regions where patients are seeking branded generic medicines
Revenues are likely 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 2020, the company received the U.S. approval for Freestyle Libre 2 (an integrated continuous glucose monitoring or iCGM system for adults and children), the CE Mark for Libre 3 (integrates Libre's accuracy and performance into the world's smallest fitness disposable sensor) and Libre Sense Glucose Sport (which is Abbott’s initial step in a very intentional approach to pursue mass market biosensor opportunities beyond diabetes).
These developments are anticipated to have led to full-quarter contributions to the Diabetes Care business’ top line during the third quarter.
Abbott, in July, projected third-quarter 2021 reported earnings per share from continuing operations of at least 90 cents. However, this took into consideration the company’s apprehension of a sequential reduction in the COVID-19 testing-related sales compared to the second quarter.
For third-quarter 2021, the Zacks Consensus Estimate for total revenues of $9.43 billion indicates a 6.5% rise from the prior-year quarter’s reported figure. The consensus mark for earnings is pegged at 92 cents, suggesting a 6.1% decline year on year.
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 0.00%. 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.
UnitedHealth Group Inc. has an Earnings ESP of +1.95% and carries a Zacks Rank of 2, currently. The company is slated to release third-quarter 2021 results on Oct 14. You can see the complete list of today’s Zacks #1 Rank stocks here.
Quest Diagnostics Inc. has an Earnings ESP of +12.10% and holds a Zacks Rank of 2, at present. The company is scheduled to report quarterly numbers on Oct 21.
West Pharmaceutical Services, Inc. has an Earnings ESP of +1.93% and is a Zacks #2 Ranked stock. The company will announce third-quarter figures on Oct 28.
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