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Abbott (ABT) Meets Q3 Earnings Estimates, Lowers EPS Guidance

Zacks Equity Research

Abbott Laboratories ABT reported third-quarter 2019 adjusted earnings from continuing operations of 84 cents per share, in line with the Zacks Consensus Estimate. The bottom line improved 12% from the prior-year quarter. Reported earnings from continuing operations came in at 53 cents, showing a 70.9% surge from the year-ago quarter.

Third-quarter worldwide sales came in at $8.08 billion, up 5.5% year over year on a reported basis. The top line missed the Zacks Consensus Estimate by 0.2%.

On an organic basis (adjusting for the impact of foreign exchange along with the prior year first, second and third-quarter results for a non-core business within U.S. Adult Nutrition), sales increased 7.6% year over year in the reported quarter.

Quarter in Detail

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

In the third quarter, EPD sales rose 4.4% on a reported basis (improved 7.9% on an organic basis) to $1.21 billion. This included a 3.5% adverse impact from currency fluctuations. Sales in the key emerging markets rose 2.8% year over year, excluding an adverse 4% impact of foreign exchange. Organically, sales climbed 6.8% in this market.

Abbott Laboratories Price, Consensus and EPS Surprise

Abbott Laboratories Price, Consensus and EPS Surprise

Abbott Laboratories price-consensus-eps-surprise-chart | Abbott Laboratories Quote

Medical Devices business sales increased 8.9% on a reported basis to $3.07 billion. On an organic basis, sales grew 10.6%. Double-digit growth in Electrophysiology, Heart Failure, Structural Heart and Diabetes Care contributed to the rise.

Cardiovascular and Neuromodulation sales reportedly (up 5.6% on an organic basis) rose 4.2%.

In Electrophysiology, growth was led by solid performance by cardiac diagnostic and ablation catheters.

Heart Failure sales growth was 23.2% organically, driven by strong market adoption of Abbott's HeartMate 3 left ventricular assist device following its FDA approval as a destination therapy in late 2018.

Within Structural Heart, the company registered 16% organic growth on a year-over-year basis driven by Abbott's MitraClip device.

Diabetes Care sales improved 29.6% (up 33.1% organically), buoyed by consistent consumer uptake of FreeStyle Libre, the revolutionary continuous glucose monitoring system of Abbott.

Nutrition sales were up a marginal 2% year over year on a reported basis (up 3.8% on an organic basis) to $1.87 billion. Pediatric Nutrition sales increased 1.4% on an organic basis. Adult Nutrition sales were up 6.9% organically.

Diagnostics sales were up 4.7% year over year on a reported basis (up 6.6% on an organic basis) to $1.91 billion. Core Laboratory Diagnostics sales grew 10.6% on an organic basis led by solid growth in the United States and international markets. Molecular Diagnostics slipped 6.4%, on an organic basis. Point of Care Diagnostics sales were up 6.7% on an organic basis led by the company’s i-STAT handheld system in the United States and internationally. Rapid Diagnostics sales improved 0.8% on an organic basis in the third quarter led by infectious disease testing in developed markets and cardio-metabolic testing globally.

2019 Guidance

For the full year, adjusted earnings from continuing operations have been lowered to a new band of $3.23 to $3.25 from the earlier $3.21-$3.27. The Zacks Consensus Estimate of $3.24 lies within this projected range.

The company has also issued the fourth-quarter 2019 adjusted earnings per share outlook. It expects to report adjusted earnings from continuing operations in the range of 94-96 cents. The consensus mark of 94 cents falls within the predicted range.

Our Take

Abbott exited the third quarter of 2019 on a mixed note with earnings meeting estimates and revenues missing the same.

Overall, we are optimistic about Abbott’s strong and consistent EPD and Medical Devices performance organically. Particularly, Abbott has been riding high on healthy growth within its Diabetes Care business. The company has been hogging the limelight for developments in the flagship, sensor-based continuous glucose monitoring system — FreeStyle Libre System. Also, solid contributions from the company’s other two businesses buoy optimism. Meanwhile, the company’s emerging market performance has been promising on several strategic developments.

On the flip side, increasing currency headwinds and lower non-governmental organization purchases in Africa significantly dented the company’s international performance. Also, Abbott has narrowed its EPS guidance for 2019.

Zacks Rank & Key Picks

Currently, Abbott carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader medical space are Medtronic MDT, Varian VAR and Syneos Health SYNH, each carrying a Zacks Rank #2 (Buy). While Varian has a Zacks Rank #1 (Strong Buy), the other two carry a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Medtronic’s second-quarter fiscal 2020 revenues is pegged at $7.68 billion, suggesting 2.6% growth from the prior-year reported figure. The same for adjusted earnings per share stands at $1.28, implying a 4.9% improvement from the year-ago reported number.

The Zacks Consensus Estimate for Varian’s fourth-quarter fiscal 2019 revenues is pegged at $853.3 million, calling for a year-over-year increase of 6.4%. The same for adjusted earnings per share stands at $1.21, indicating an increase of 4.3% from the year-ago reported figure.

The Zacks Consensus Estimate for Syneos’ third-quarter fiscal 2019 revenues is pegged at $1.18 billion, suggesting 6.03% growth from the prior-year reported figure. The same for adjusted earnings per share stands at 72 cents, implying a 5.3% improvement from the year-ago reported number.

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