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Abbott (ABT) Down 0.4% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Abbott (ABT). Shares have lost about 0.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Abbott due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Abbott Q1 Earnings, Revenues Exceed Estimates

Abbott reported first-quarter 2024 adjusted earnings per share of 98 cents, which topped the Zacks Consensus Estimate by 2.1%. However, the adjusted figure decreased 4.9% from the prior-year quarter’s level. The quarter’s adjustments include 28 cents of certain non-recurring items.

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GAAP earnings per share came in at 70 cents, down 6.7% year over year.

First-quarter worldwide sales of $9.96 billion were up 2.2% year over year on a reported basis. The top line exceeded the Zacks Consensus Estimate by 1.2%.

Organically, sales improved 4.7% year over year. On an organic basis (excluding the impact of COVID-19 testing sales), sales rose 10.8% year over year in the reported quarter.

Q1 Results in Detail

Abbott operates through four segments — Established Pharmaceuticals, Medical Devices, Nutrition and Diagnostics.

In the first quarter, Established Pharmaceuticals’ product sales increased 3.1% on a reported basis (up 13.7% on an organic basis) to $1.23 billion.

Organic sales in key emerging markets improved 15.4% year over year. This was led by growth in several geographies and therapeutic areas, including respiratory, women's health and central nervous system/pain management.

The Medical Devices segment’s sales rose 14.2% year over year on a reported basis (up 14.3% on an organic basis) to $4.45 billion.

Sales growth was led by double-digit growth in Diabetes Care, Electrophysiology, Neuromodulation and Structural Heart. Several recently launched products and new indications contributed to the strong performance, including Amplatzer Amulet, Navitor, TriClip and AVEIR.

The Diabetes Care division reported organic sales growth of 20.7% year over year, led by FreeStyle Libre, which contributed $1.5 billion to revenues in the reported quarter. Structural Heart sales rose 13%. Heart Failure sales improved 8.4% year over year organically.

The Vascular division recorded organic sales growth of 5.8% in the quarter under review. The Electrophysiology, Rhythm Management and Neuromodulation divisions recorded organic growth of 18.4%, 7.5% and 17.4%, respectively, in the quarter under review.

Nutrition sales rose 5.1% year over year on a reported basis (up 7.7% on an organic basis) to $2.07 billion.

Pediatric Nutrition sales registered 10.5% growth on an organic basis. Adult Nutrition sales improved 5.3% organically. Per the company, Adult Nutrition sales benefited from the strong global sales performance of Abbott's market-leading complete and balanced nutrition brand, Ensure.

Diagnostics sales were down 17.6% year over year on a reported basis (down 15.5% on an organic basis) to $2.21 billion.

Core Laboratory Diagnostics sales were up 5.9% organically. Molecular Diagnostics declined 11.7% on an organic basis. Rapid Diagnostics sales plunged 38.7% on an organic basis, whereas Point of Care Diagnostics sales rose 3.6% organically.

Margins

In the first quarter, the gross profit rose 1.6% year over year to $5.50 billion despite a 3.1% increase in the cost of products sold (excluding amortization expense). However, the gross margin contracted 36 basis points (bps) to 55.2%.

Selling, general and administration expenses were up 7.1% year over year to $2.96 billion. Research and development expenses increased 4.6% year over year to $684 million. The company reported an adjusted operating profit of $1.86 billion in the quarter under review, down 7.1% year over year. Also, the adjusted operating margin fell by 187 bps to 18.6%.

2024 Guidance

Abbott provided an updated guidance for 2024.

Full-year adjusted earnings (excluding specified items of $1.30 per share) are expected in the range of $4.55-$4.70 (previously $4.50-$4.70) per share. The Zacks Consensus Estimate is pegged at $4.62.

Full-year 2024 organic sales growth, excluding COVID-19 testing-related sales, is expected in the range of 8.5 (earlier 8). The Zacks Consensus Estimate for sales is currently pegged at $41.91 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, Abbott has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Abbott has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Abbott is part of the Zacks Medical - Products industry. Over the past month, Neogen (NEOG), a stock from the same industry, has gained 12.4%. The company reported its results for the quarter ended February 2024 more than a month ago.

Neogen reported revenues of $228.81 million in the last reported quarter, representing a year-over-year change of +4.8%. EPS of $0.12 for the same period compares with $0.12 a year ago.

For the current quarter, Neogen is expected to post earnings of $0.12 per share, indicating a change of -14.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -20.7% over the last 30 days.

Neogen has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.

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