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Abbott Labs (ABT) Q3 Earnings: What’s Ahead for the Stock?


Abbott Laboratories ABT is scheduled to report third-quarter 2016 results before the opening bell on Oct 19.

Last quarter, Abbott Labs delivered a positive earnings surprise of 3.77%. Let’s see how things are shaping up for this quarter.

Factors at Play

Abbott Labs operates under four segments – Established Pharmaceuticals Division (EPD), Medical Devices, Diagnostics and Nutrition. Continued outperformance at the Medical Devices and Diagnostics businesses should drive sales in the third quarter.

The Diagnostics segment should see persistent above-market performance in Core Laboratory and Point of Care Diagnostics. The second quarter launch of AlinIQ should also add to the company’s top line. Segment sales are anticipated to grow in the mid single digits in the third quarter.

Sales in the Nutrition business are projected to increase in the low-to-mid single-digit range in the to be reported quarter. Continued uptake of the recently launched products in Pediatric Nutrition should bode well.

At EPD, sales are expected to grow in the high single digits in the third quarter. Realignment of the division through acquisitions in Latin America and Russia, along with business divestitures in developed markets, has positioned the company advantageously for the coming quarters.

At Medical Devices, Vascular is expected to grow in the low single digits in the third quarter, while Diabetes sales are expected to increase in the high-single digit band. Medical Optics is envisioned to improve in the low-to-mid single-digit range. The Medical Devices segment got a significant boost with the Jul 2016 FDA approval of Absorb bioresorbable stent and TECNIS Symfony intraocular lenses.

For the third quarter, earnings have been estimated to be in the range of 57 to 59 cents per share. Operational sales growth at the current exchange rates is expected to be in the mid-single digits. Third-quarter sales are, however, expected to be hurt by negative currency impact of around 1.5%.

We expect sluggish growth in the Venezuelan market to persist in the third quarter. During the quarterly call, investor focus should remain on the company’s performance and sales ramp-up of the newly launched products.

Surprise History

Abbott Labs has an impressive track record. The company surpassed estimates in each of the trailing four quarters with an average earnings surprise of 3.11%.

ABBOTT LABS Price and EPS Surprise

ABBOTT LABS Price and EPS Surprise | ABBOTT LABS Quote

What Our Model Indicates

Our proven model does not conclusively show that Abbott Labs is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to beat earnings. However, that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 58 cents.

Zacks Rank: Abbott Labs has a Zacks Rank #4 (Sell). As it is, we caution against stocks with a Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some health care stocks that you may want to consider instead, as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Johnson& Johnson JNJ is scheduled to report third-quarter results on Oct 18. The company has an Earnings ESP of +4.88% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Amgen Inc. AMGN has an Earnings ESP of +1.79% and a Zacks Rank #3. The company is expected to report results on Oct 26.

The Earnings ESP for Bristol-Myers Squibb Company BMY is +7.81% and it carries a Zacks Rank #3. The company is scheduled to release earnings on Oct 27.

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