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Abbott (ABT) Tops Q1 Earnings on Strong EPD, Medical Device


Abbott Laboratories ABT reported first-quarter 2017 adjusted earnings from continuing operations of 48 cents per share, 11.6% higher than the Zacks Consensus Estimate and up 17.1% year over year.

Reported earnings for the quarter came in at 22 cents per share, way ahead of the year-ago number of 4 cents.

First-quarter worldwide sales came in at $6.33 billion, up 29.7% year over year on a reported basis. The quarterly figure also remains ahead of the Zacks Consensus Estimate of $6.11 billion.

On a comparable operational basis (adjusting the impact of foreign exchange, certain acquisitions and divestments) sales increased 3.2% year over year in the reported quarter.

Abbott Laboratories Price, Consensus and EPS Surprise

Abbott Laboratories Price, Consensus and EPS Surprise | Abbott Laboratories Quote

Quarter in Detail

Abbott Labs operates through four segments – Established Pharmaceuticals Division (EPD), Medical Devices, Nutrition and Diagnostics.

EPD sales were up 7% on a reported basis (up 5.7% on comparable operational basis) to $950 billion. There was a positive impact of 1.3% due to currency fluctuations. Sales in key emerging markets increased 15.2% (up 12.5%) driven by commercial initiatives and locally relevant portfolio expansion. Sales in Other segment declined 13.4% (down 11.3%) to $220 million on poor Venezuelan operations.

The Medical Devices business sales spiked 100.2% on a reported basis on St. Jude inclusion to $2.39 billion. However, on a comparable operational basis, sales increased 4.5%.

Cardiovascular and Neuromodulation sales increased 207% on a reported basis (up 2.4% on comparable operational basis) on double-digit growth in Electrophysiology, Structural Heart and Neuromodulation. Vascular product sales were up 0.1% on a comparable operational basis on the back of double-digit growth in MitraClip. Also, strong sales growth in Abbott's Endovascular business was driven by vessel closure products and Supera.

Diabetes Care sales increased 20.2% on a reported basis (up 22.9%), driven by double-digit international sales growth led by continued consumer uptake of FreeStyle Libre, Abbott's revolutionary continuous glucose monitoring system.

Nutrition sales decreased 1.7% year over year on a reported basis (down 1% on a comparable operational basis). Unfavorable foreign exchange impacted sales by 0.7%. Pediatric Nutrition sales decreased 3.3% on a comparable operational basis. Adult Nutrition sales however, increased 2% on a comparable operational basis.

Diagnostics sales increased 3.6% year over year (up 4.7% on a comparable operational basis). While Core Laboratory sales increased 4.3%, Point of Care Diagnostics sales increased 7.5%, both on a comparable operational basis. Molecular Diagnostics sales were up 3.9% as strong growth in the infectious disease testing business was partially offset by the planned scale-down of the genetics business.

2017 Guidance

Abbott Labs reiterated its full-year 2017 guidance. The company still forecasts earnings per share from continuing operations to remain within the range of 92 cents to $1.02. Adjusting certain net specified items for the full year of approximately $1.48 per share, adjusted earnings per share from continuing operations is expected to stay within the range of $2.40 to $2.50. The current Zacks Consensus Estimate is pegged at $2.45, at the midpoint of the projected range.

Our Take

One more time, Abbott Labs successfully exceeded the Zacks Consensus Estimate on both earnings and sales front. We are optimistic about the company’s strong and consistent EPD and Medical Devices performance. However, these strong performances were to some extent offset by sluggish Nutrition business.

However, the company stands to benefit from the recently completed acquisition of St. Jude Medical, which has already started offering it an industry leading pipeline across cardiovascular, neuromodulation, diabetes and vision care.

In 2017, the company plans to execute its existing operating model which focuses on selling portfolio in core therapeutic areas. This will lead to the creation of unique channel opportunities in differentiated relationships with physicians, retailers and pharmacies that are looking to offer a complete line of solutions to treat prominent local health conditions. Also, Abbott Labs has plans to beef up its development capabilities with an expanded EPD innovation center in India.

Moreover, the sale of Abbott Medical Optics to Johnson & Johnson will help the company in reshaping its portfolio in order to focus on gaining leadership positions in cardiovascular devices and expanding diagnostics.

Abbott Labs currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in the broader medical sector include Inogen Inc. INGN, Hologic, Inc. HOLX and Sunshine Heart Inc SSH. Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Inogen has a long-term expected earnings growth rate of 17.50%. The stock registered an impressive one-year return of 64.2%.

Hologic has a long-term expected earnings growth rate of 11.33%. The stock registered a solid one-year return of roughly 21.3%.

Sunshine Heart posted a positive earnings surprise of 58.24% in the last reported quarter. The stock has a stellar EPS growth record (last three–five years of actual earnings) of almost 22%.

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