Can Abbott (ABT) Q4 Earnings Ride on Growth in All Lines?

Abbott Laboratories ABT is slated to report fourth-quarter 2019 as well as full-year results on Jan 22, before the market opens.

In the last reported quarter, the company reported in-line earnings and delivered positive surprises in two of the trailing four quarters, the average beat being 1.45%.

Let's see, how things are shaping up for this announcement.

Factors at Play

Over the last few quarters, Abbott has been riding high on a healthy growth curve within its Diabetes Care business. The company has been hogging the limelight for developments in its flagship, sensor-based continuous glucose monitoring (CGM) system, widely known as FreeStyle Libre System. This upside is likely to get reflected in the upcoming quarterly results.

Notably, in the last reported quarter, Diabetes Care sales surged at a stupendous rate (up 33.1% year over year organically), led by a consistent consumer uptake of FreeStyle Libre. Libre alone registered organic sales growth of 70% in the third quarter, a trend that most likely continued in the fourth quarter with an excellent performance worldwide.

Abbott Laboratories Price and EPS Surprise

Abbott Laboratories Price and EPS Surprise

Abbott Laboratories price-eps-surprise | Abbott Laboratories Quote

In this regard, FreeStyle Libre recently obtained a public reimbursement coverage in Ontario and Quebec, thus becoming the first and the only transfer base glucose monitoring system to be listed by any provincial health plan in Canada. This uptrend is expected to have aided the company’s top line in the to-be-reported quarter.

Moreover, we are looking forward to the company’s two back-to-back alliances with Sanofi and Tandem Diabetes Care to integrate glucose sensing and insulin delivery technologies. These new developments are also expected to have contributed to the company’s fourth-quarter top line.

The Zacks Consensus Estimate of $703 million for fourth-quarter Diabetes Care revenues indicates a rise of 32.6% from the year-ago reported figure.

Alike the prior reported quarter, Abbott in the impending quarterly release is anticipated to have gain from a solid performance by the Established Pharmaceuticals Division (EPD) business, which has been recording operational sales growth over the last few quarters across several geographies including India, China and Brazil. Per Abbott, its EPD business is well-positioned for sustained above-market growth in some of the largest and the fastest growing pharmaceutical markets in the world.

Management expects EPD to deliver high-single-digit growth in the to-be-reported results.

Currently, the Zacks Consensus Estimate of $1.16 billion for EPD revenues suggests a 6.7% improvement from the year-earlier reported number.

We are also optimistic about the consistently sturdy Diagnostics business, courtesy of robust contributions from all sub-segments, namely Core Laboratories Diagnostics, Molecular Diagnostics and Point of Care.

Moreover, we are impressed by the accelerated global rollout of the company’s Alinity suite of instruments. The launch in Europe and other international markets is expected to have driven strong growth in Abbott’s core laboratory business outside the United States through the to-be-reported quarter.

In the United States, this business is growing rapidly on the achievement of regulatory approvals of immunoassay and clinical chemistry tests for Alinity. This, in turn, might have also boosted the company’s fourth-quarter top-line performance.

Per Abbott, it is well-poised for sustainable growth in years to come, based on the company’s rollout of the full suite of Alinity systems across additional geographies including the United States.

For the fourth quarter, the company forecasts the Diagnostics businesses to grow in mid-to-high single digits.

The Zacks Consensus Estimate of $2.05 billion for Diagnostic revenues implies a 4.7% improvement from the figure registered in the comparable quarter last year.

We also encouragingly note that Nutrition is Abbott’s most speedily-growing business owing to aging population, increasing rate of chronic diseases and the rise of the middle class in the emerging markets. Furthermore, Abbott’s pediatric nutrition business continues to thrive in the United States. For the fourth quarter, the company projects low-to-mid-single digit sales growth from this segment.

The Zacks Consensus Estimate of $1.83 billion for Nutritional revenues hints at a 3.2% rise from the number recorded in the prior-year quarter.

How Are Q4 Estimates Faring?

For fourth-quarter 2019, the Zacks Consensus Estimate for total revenues of $8.26 billion implies growth of 6.4% from the prior-year reported figure. Also, the consensus estimate for earnings is pegged at 95 cents, indicating 17.3% growth from the year-ago reported number.

Earnings Whispers

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise. But this is not the case here as you will see below.

Earnings ESP: Abbott has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Abbott carries a Zacks Rank #4 (Sell).

Stocks Worth a Look

Here are a few medical stocks worth considering from the same space with the right mix of elements to surpass expectations this time around.

Tandem Diabetes Care, Inc. TNDM has an Earnings ESP of +27.59% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Exact Sciences Corporation EXAS has an Earnings ESP of +10.16% and a Zacks Rank #3.

NuVasive NUVA has an Earnings ESP of +0.88% and a Zacks Rank of 3.

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