Medical device maker Abbott Laboratories on Wednesday delivered better-than-expected quarterly results and upped its earnings guidance for the third straight quarter. Shares rose greater than 1%, shaking off an initially subdued response. Revenue within the three months ended Sept. 30 rose 4.9% to $10.64 billion, topping estimates of $10.55 billion, based on data provider LSEG. Organic sales, which exclude Covid testing, were up 8.2% from the year-ago period. It’s unclear whether analyst estimates are comparable. Adjusted earnings per share (EPS) of $1.21 beat LSEG expectations by a penny and increased 6.14% on an annual basis. ABT YTD mountain Abbott Labs’ year-to-date stock performance. Abbott shares are extending their period of outperformance versus the market and health-care peers. The stock entered Wednesday’s session up somewhat greater than 10% because the July 26 close — after the closing bell that day, the corporate was ordered to pay $495 million in damages in a court case over its premature infant formula, which has been a serious overhang on the stock since mid-March. That advance is ahead of the S & P 500 , a closely followed health-care exchange-traded fund , which gained 6.5% and 1.9%, respectively, over the identical stretch. Bottom line In its third quarter, Abbott Labs demonstrated why we desired to stick to the stock within the face of legal battles that emerged earlier this 12 months and spooked investors. We’re reiterating our price goal of $130 and a couple of rating, meaning we might wait for a pullback before adding to our position. At its lows of 2024 in July, Abbott’s market cap stood at $174.1 billion, roughly $32 billion below where it was in March before its competitor within the premature infant formula market lost a court case and put Abbott’s own case load within the highlight. We battled the stock within the months that followed, arguing the selling was overblown, especially considering the scientific community backed Abbott’s view that the formulas were medically vital for premature infants and didn’t cause an intestinal illness commonly abbreviated as NEC. A trio of U.S. agencies earlier this month threw more support behind use of the formulas . At its highs of Wednesday’s session, Abbott had clawed back all of its market cap losses since March 14. “Abbott really got here through,” Jim Cramer said Wednesday. “There’s just rather a lot to love with the Abbott quarter.” Commentary The place to begin is Abbott’s medical devices segment, which saw a roughly 12% increase in revenues to a better-than-expected $4.75 billion, as seen within the chart below. On an organic basis, which strips out the impact of foreign exchange fluctuations and divestitures, medical device sales rose 13.3%. It’s nice when an organization’s largest segment by sales is the one with the fastest growth rate — and that is the case with Abbott. FreeStyle Libre, a continuous glucose monitor (CGM) for individuals with diabetes, continued its impressive growth within the quarter, with organic sales up 21%, a slight acceleration from the prior three-month period. While Abbott has benefited from the struggles of CGM competitor Dexcom , CEO Robert Ford maintained an upbeat view available on the market within the near and long terms. “It is a mass market opportunity that we have now,” he said, noting there’s about 10 million CGM users worldwide at once but over 100 million diabetics in developed countries. Abbott and its peers are increasingly targeting CGMs to non-diabetics, hoping that health-conscious people would wish to use biosensors to find out about their body’s response to aspects like food, stress and exercise. Abbott launched its over-the-counter CGM called Lingo within the U.S. in early September , and Ford said the product is “off to a superb start.” People can buy a one-sensor pack for $49, two for $89 or six for $249. The 2-sensor pack is the most well-liked version, he said. The sensors last about two weeks, and Ford said he was positively surprised by the reorder rates to this point. Abbott has targeted $10 billion in sales of CGMs by 2028, and Lingo represents a “great opportunity” so as to add to that goal over time, Ford said. One other highlight: Abbott Labs announced its board authorized a latest $7 billion share purchase program. Its prior authorization from 2021 was getting low, Ford said. Within the third quarter, Abbott bought back $750 million price of stock, with Ford saying executives believed there was a disconnect between the stock’s valuation and the corporate’s business fundamentals. Indeed, Abbott normally prioritizes investing in its product pipeline over share repurchases, so the proven fact that management stepped up its buyback program really shows how they feel in regards to the current stock price. Abbott’s nutrition business — home to brands reminiscent of Ensure protein powder and PediaSure drinks for teenagers — was a weak spot, just because it was within the second quarter. Sales were down about 0.3% 12 months over 12 months to $2.07 billion, in need of the $2.17 billion expected by analysts, based on FactSet. On an organic basis, revenue was up 3.4% within the segment. Ford said the international pediatric business was the largest drag on nutrition within the quarter, blaming that on Abbott’s own “business execution” early within the quarter. The corporate quickly recognized the softness and took steps to repair it, Ford said, including personnel changes followed by inventory adjustments to distributors. Ford said early indications show that Abbott took the proper corrective actions and that growth in that division and the segment overall should improve in the present quarter. On the lawsuits, specifically, Ford once more issued a robust defense of the premature infant formula. He said the statement from the three U.S. health agencies — the Food and Drug Administration, Centers for Disease Control and Prevention, and National Institutes of Health — “says rather a lot.” “It was a really strong statement,” Ford said, though he noted that the judge in an ongoing trial in Missouri has yet to permit it to be submitted as evidence within the case. He said he expects that in future cases, the statement and an accompanying report on NEC and formulas shall be included as evidence for juries to think about. Abbott’s recent stock performance suggests investors are getting more comfortable with the litigation risk, nevertheless it’s still too early to declare complete victory. That is why we’re generally holding off on adding to our position. Nevertheless, there’s little doubt in regards to the strength of Abbott’s underlying fundamentals. In due time that ought to occupy an increasing number of of the highlight. Abbott Laboratories Why we own it : Abbott is a high-quality medtech company growing at a quick clip. The stock has been coping with two overhangs: falling Covid testing sales and concerns that GLP-1 adoption will disrupt its leading continuous glucose monitor. As Abbott’s organic sales growth continues to shine, the market will realize each concerns are overblown. Competitors : Dexcom and Edwards Lifesciences Weight in Club portfolio : 2.89% Most up-to-date buy : 5/29/2024 Initiated : Jan. 29, 2024 Guidance Abbott Labs now projects adjusted EPS within the range of $4.64 to $4.70, which on the midpoint is up a penny versus its prior guidance of $4.61 to $4.71. It is the third consecutive quarter that Abbott has upped the center of its EPS forecast. The corporate reiterated its full-year organic sales growth outlook of 9.5% to 10%. (Jim Cramer’s Charitable Trust is long ABT. See here for a full list of the stocks.) 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Attendees walk by the Abbott booth during CES 2024 on the Las Vegas Convention Center on January 10, 2024 in Las Vegas, Nevada.
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Medical device maker Abbott Laboratories on Wednesday delivered better-than-expected quarterly results and upped its earnings guidance for the third straight quarter. Shares rose greater than 1%, shaking off an initially subdued response.
