Shares of Abbott Laboratories jumped Wednesday after the diversified health-care company delivered strong first-quarter results and left its earnings guidance intact — an enormous sign of confidence in an uncertain time. Revenue within the three months ended March 31 rose 4% to $10.36 billion, narrowly missing the consensus of $10.4 billion, in accordance with estimates compiled by LSEG. Organic sales, excluding Covid testing results, rose 8.3%, beating the 7.7% estimate, in accordance with FactSet. Adjusted earnings per share (EPS) increased 11.2% on an annual basis to $1.09, topping expectations by 2 cents, LSEG data showed. ABT YTD mountain Abbott Laboratories YTD Abbott’s earnings rally extends what has already been 12 months for the stock in a brutal overall market. Shares of Abbott entered Wednesday’s session because the second-best performing Club stock, advancing 11.6%. Only CrowdStrike , with a 14.8% gain, had done higher. Abbott has also significantly outperformed a basket of medical device stocks this 12 months. Bottom line Abbott turned in a superb quarter in a difficult, tariff-fueled environment. The corporate topped Wall Street expectations on its three primary profitability metrics — earnings per share, adjusted gross margin, and adjusted pretax income margin — while also delivering better-than-expected organic sales growth when excluding Covid tests. The miss on topline revenue shouldn’t be concerning. For starters, it was just $40 million below consensus. Plus, the shortfall is tied to its diagnostics segment, which faces pressures largely outside its control — specifically, low-margin Covid test sales were down $120 million from a 12 months ago, after which China’s national strategy to manage health-care costs remained a drag on the costs paid to Abbott. “We’re seeing growth in our growth in our diagnostic business in all places except China,” CEO Robert Ford said on the earnings call. “Outside of China this quarter, we grew around 7%.” Abbott is taking a look at ways to stoke growth in other geographies to offset the realities of doing business in China, Ford said. “We’re just going to must undergo this. [China] continues to be a very important market. It’s still got good profitability.” Abbott Laboratories Why we own it : Abbott is a high-quality medical technology company growing at a quick clip for its industry. The stock has handled various overhangs since we have owned it, equivalent to litigation concerns tied to its specialized infant formula; falling Covid testing sales; and concerns that GLP-1 adoption will disrupt its continuous glucose monitor business. Nevertheless, As Abbott’s organic sales growth continues to shine. Competitors : Dexcom , Boston Scientific and Edwards Lifesciences Most up-to-date buy : May 29, 2024 Initiated : Jan. 29, 2024 The cherry on top of the quarter was that Abbott reaffirmed its 2025 earnings guidance of $5.05 to $5.25 per share despite a considerably different tariff picture than in late January . Abbott estimates a tariff hit this 12 months of a “few hundred million dollars,” with the impact really beginning to be felt within the third quarter, Ford said. The corporate is taking a look at all types of mitigation plans, Ford said, though not on the expense of pulling back investments in future growth equivalent to lowering research and development spending. For instance, a weaker U.S. dollar helps Abbott, which generates about two-thirds of its revenue overseas. With 90 manufacturing sites world wide, Abbott also has the flexibility to “considerably” mitigate the tariff impact on a long-term basis. “Prior to the entire tariffs … given the momentum that we were seeing in the bottom business, we were even considering raising our EPS guidance,” Ford said. “But tariffs are here, so we felt reaffirming our guidance is already a reasonably strong statement.” We agree. For that reason, we’re reiterating our price goal of $145 a share — no small feat in a market where PTs are being cut left and right — and keeping our hold-equivalent 2 rating on the stock. We all know Abbott’s tariff exposure is marginal, and it has other drivers to offset those headwinds. Abbott may very well be a stock to purchase if we see one other day where tariff headlines drive down your entire stock market. Commentary The chart above illustrates the standard of Abbott’s quarter. Diagnostics was the one one in all Abbott’s 4 reporting segments to miss on sales, but as discussed, it isn’t a cloth concern. Nutrition — home to brands equivalent to Ensure protein powder and PediaSure drinks for teenagers — topped expectations, and Ford said the corporate is making progress on regaining market share it lost a couple of quarters ago as a result of execution misfires. Sales in established pharmaceuticals — its generic pharmaceutical products business that only operates internationally — also got here in higher than expected. Medical devices — its largest and most vital segment — delivered strong year-over-year growth, up 9.9% on a reported basis and 12.6% organically, which excludes foreign-exchange headwinds. In its fast-growing diabetes portfolio, sales of continuous glucose monitors, or CGMs, totaled $1.7 billion in the primary quarter, up greater than 20% 12 months over 12 months and 30% within the U.S. In 2024, the CGM business, which incorporates FreeStyle Libre for diabetes patients, grew 22% annually and 27% within the U.S. That is the form of “base business” momentum that Ford referenced when explaining how Abbott contemplated its earnings guidance for the 12 months. So far as tariffs go here, Ford also mentioned that Abbott has two manufacturing sites for Libre within the U.S. to serve customers in its home market. One other necessary product for Abbott is its Volt PFA System, which in March secured an earlier-than-expected approval from European regulators. Volt, which is used to treat abnormal heart rhythms, helps Abbott compete against the likes of Boston Scientific and Medtronic out there for pulsed field ablation (PFA) devices. The legacy technique to treat conditions equivalent to atrial fibrillation used extreme heat (radiofrequency ablation) or cold (cryoablation). PFA devices, against this, use an electrical pulse to destroy the cells that cause abnormal heart rhythms — an approach that’s billed as safer and quicker than traditional treatment options. Abbott plans to submit for U.S. approval for Volt later this 12 months, with clearance possibly coming in early 2026. “The initial feedback that my team has shared with me has been very, very positive,” Ford said of Volt’s launch in Europe. “Obviously, we’re going to begin with a rollout where we’ll focus somewhat bit on the users that were a part of our clinical trial, after which we’ll begin to form of ramp up that as we go into the second half of the 12 months.” He added, “I believe the product goes to do very well. I believe it will do what we intended it to do.” Abbott’s effort to shed a litigation overhang from its stock suffered a setback throughout the first quarter — though our belief is that it would just be temporary. In mid-March, a judge in Missouri ordered a re-trial in a case that Abbott and its rival Reckitt won in November , beating back allegations that their specialized formulas for premature babies caused a severe intestinal illness referred to as necrotizing enterocolitis, or NEC. Abbott has said it would appeal the re-trial ruling, which was based on alleged misconduct from the lawyers for the defendants throughout the initial proceedings. Executives did probably not discuss the NEC proceedings on the decision, aside from to say it doesn’t influence the best way they’re evaluating its entire business. The essential takeaway here: Abbott’s NEC litigation has not gone away, but we proceed to imagine the risks are much more manageable than what the market previously estimated. (Jim Cramer’s Charitable Trust is long ABT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you’ll receive a trade alert before Jim makes a trade. 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Abbott Chairman of the Board and CEO Robert B. Ford delivers a keynote address at CES 2022 at The Venetian Las Vegas on January 6, 2022 in Las Vegas, Nevada.
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Shares of Abbott Laboratories jumped Wednesday after the diversified health-care company delivered strong first-quarter results and left its earnings guidance intact — an enormous sign of confidence in an uncertain time.
