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Abbott Laboratories (ABT) Q3 2024 Earnings Call Highlights: Strong Growth in Diabetes Care and ...

GuruFocus News
·4-min read

  • Organic Sales Growth: More than 8%, excluding COVID testing sales.

  • Adjusted Earnings Per Share (EPS): $1.21.

  • Nutrition Sales Growth: 3.5% in the quarter.

  • US Pediatric Nutrition Growth: 12% driven by market share gains in infant formula.

  • US Adult Nutrition Growth: 11.5% led by Ensure and Glucerna brands.

  • Core Laboratory Diagnostics Sales Growth: 4.5% excluding COVID testing sales.

  • EPE Sales Growth: 7% in the quarter.

  • Med Tech Sales Growth: More than 13%.

  • Diabetes Care Sales: Continuous glucose monitors exceeded $1.6 billion, growing 21%.

  • Electrophysiology Growth: 14% driven by double-digit growth in catheters and cardiac mapping-related products.

  • Structural Heart Growth: More than 16% driven by surgical valves and transcatheter products.

  • Rhythm Management Growth: 7% led by AVEIR leadless pacemaker and Assert cardiac monitor.

  • Heart Failure Growth: 14% driven by heart-assist devices.

  • Vascular Growth: 5% led by vessel closure and coronary imaging.

  • Neuromodulation Sales Growth: 5% driven by demand for spinal cord stimulation devices.

  • Adjusted Gross Margin Ratio: 56.3% of sales.

  • Adjusted R&D Expense: 6.5% of sales.

  • Adjusted SG&A Expense: 27.2% of sales.

  • Adjusted Tax Rate: 15%.

  • Fourth Quarter EPS Guidance: $1.31 to $1.37.

Release Date: October 16, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Abbott Laboratories (NYSE:ABT) reported strong organic sales growth of over 8%, excluding COVID testing sales.

  • The company achieved double-digit growth in its US pediatric and adult nutrition segments, driven by market share gains.

  • Sales in the diabetes care segment grew by 21%, with continuous glucose monitors exceeding $1.6 billion in sales.

  • Abbott Laboratories (NYSE:ABT) entered into a global partnership with Medtronic to connect its FreeStyle Libre CGM sensor with automated insulin delivery systems.

  • The company launched several new products and achieved key advancements in its R&D pipeline, including the US launch of the Lingo glucose monitoring sensor.

Negative Points

  • Nutrition and diagnostics segments came in below expectations, impacting overall performance.

  • The international pediatric nutrition business experienced softness due to commercial execution issues.

  • Core laboratory diagnostics sales were affected by the VBP implementation in China, impacting growth.

  • Foreign exchange had an unfavorable impact of 2.5% on third-quarter sales.

  • The company faced temporary supply challenges with Libre 3, affecting its full market potential.

Q & A Highlights

Q: In Q3, devices were strong, but nutrition and diagnostics came in below expectations. What happened in those divisions, and what's giving you confidence to maintain full-year guidance? A: Robert Ford, CEO: We have a diversified portfolio, and while some units fell short, others like devices overperformed. Nutrition saw a temporary issue in international pediatric markets due to commercial execution, which we addressed. Core Lab was impacted by VBP implementation in China, but international business excluding China grew double digits. We remain confident in our full-year guidance and expect strong Q4 performance.

Q: Can you discuss the state of the CGM market and your confidence in reaching $10 billion in sales by 2028? A: Robert Ford, CEO: The CGM market is a mass market opportunity with over 100 million diabetics in developed countries. We are focused on technology, scale, and cost leadership. Libre is expected to be a $6 billion-plus product, growing 20% this year. We are ahead of our growth targets and continue to gain market share. Lingo, targeting non-diabetics, has shown strong early interest.

Q: How do you view the analyst estimates for 2025, and what are your thoughts on growth? A: Robert Ford, CEO: High single-digit growth and 10% EPS growth for 2025 seem reasonable. We are well-positioned with attractive markets and a strong pipeline. Our recent product launches are contributing significantly to revenue, and we expect this trend to continue. We are focused on expanding gross margins and disciplined investment allocation.

Q: Can you elaborate on investment spending and the share repurchase program? A: Robert Ford, CEO: We've reduced operating expenses as a percentage of sales while investing in high-growth areas like med tech and diagnostics. Our balanced capital allocation includes dividends and a new $7 billion buyback program. We aim to drive EPS through topline growth rather than share count reduction.

Q: Are there capacity constraints in the structural heart markets, and how do you see growth in this area? A: Robert Ford, CEO: We are not seeing capacity constraints and are optimistic about growth in structural heart markets. We have a comprehensive portfolio and are making investments in R&D and field presence to support growth. We expect continued strong performance in this area.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.