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Can Solid EPD Business Drive Abbott’s (ABT) Q1 Earnings?


Abbott’s ABT Established Pharmaceuticals Division (“EPD”) business has been recording operational sales growth in the last few quarters. We expect this strength to get reflected in first-quarter 2018 results as well, which are scheduled for release on Apr 18.

Click here to know how the company’s overall Q1 performance is expected to be.

Key Catalysts

This business majorly focuses on emerging markets. Notably, the key emerging markets include India, Russia, China and numerous others in Latin America as well as Brazil along with other countries. Sales in key emerging markets increased 15% (up 12.5%on comparable operational basis) driven by double-digit growth in India, China and Latin America in the last reported quarter.

Moreover, management believes that these emerging markets will continue to offer immense opportunities with favorable demographics. Accordingly, the Zacks Consensus Estimate for EPD revenues from key emerging markets of $844 million indicates a rise of 15.6% from the year-ago quarter.

Although immaterial for the to-be-reported quarter, the ongoing tensions between the United States and China regarding the imposition of tariffs on imports, has raised concerns for major MedTech players as any adverse move may affect their sales performance in China in near term.

Abbott Laboratories Price and EPS Surprise

We encouragingly note that, management expects high single-digit growth in EPD sales in the first quarter of 2018. Furthermore, the Zacks Consensus Estimate for EPD revenues of $1.09 billion shows a rise of 14.7% from the year-ago quarter.

Favorable currency translation also had a positive impact of 1.4% on EPD revenues in the last reported quarter. We encouragingly note that, management expects foreign exchange to continue to act as a tailwind in the to-be-reported quarter.

In EPD, Abbott’s consistent focus on enhancing local capabilities and expanding product portfolio within core therapeutic areas is targeted specifically to address local market needs. These efforts from the company also continue to strengthen its leadership position in the EPD markets. Abbott’s sale of developed market businesses along with acquisitions of CFR Pharmaceuticals in Latin America and Veropharm in Russia has contributed to the EPD business.

Zacks Rank & Stocks to Consider

Abbott carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical sector are Bio-Rad Laboratories BIO, Myriad Genetics, Inc. MYGN and Abiomed, Inc ABMD.

Bio-Rad Laboratories sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. It has long-term expected earnings growth rate of 15%.

Myriad Genetics has long-term expected earnings growth rate of 10%. The stock carries a Zacks Rank of 2 (Buy).

Abiomed has long-term expected earnings growth rate of 31.5%. The stock carries a Zacks Rank of 2.

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