Abbott (ABT) EPD Business Grows Strong, Macro Issues Stay

Abbott Laboratories’ ABT branded generics and international diabetes businesses should drive growth in the coming quarters. Yet, the business environment continues to be challenging. The stock carries a Zacks Rank #3 (Hold).

Over the past year, Abbott has been outperforming the industry it belongs to. The stock has lost 0.8% compared with the industry’s 28.1% fall.

Abbott exited the first quarter of 2023 with better-than-expected earnings and revenues. Organic sales growth excluding COVID testing increased 10%, led by double-digit growth in Medical Devices, Established Pharmaceuticals and Nutrition. Within EPD, sales increased 11% in the quarter led by strong performance in Brazil, China, and Southeast Asia and across several therapeutic areas, including cardiometabolic, gastroenterology, CNS and pain management. EPD successfully continued its double-digit sales growth momentum in the last two years.

Within Nutrition, sales increased more than 10%. In the United States, pediatric nutrition growth of more than 35% was driven by favorable year-ago comparable (lower sales in the first quarter of 2022 were due to a voluntary recall of certain infant formula products). Abbott continued to make good progress, increasing manufacturing production and recovering market share in this business. Internationally, total nutrition sales grew in mid-single digits overall. Sales in global adult nutrition also grew mid-single digits, driven by the strong performance of the company’s market-leading Ensure brand.

Within Diagnostics, excluding COVID testing, organic sales growth was led by mid-to-high single-digit growth in Core Lab, Rapid and Point of Care Diagnostics. Despite dull sales in China, Core Lab Diagnostics sales showed year-over-year improvement, led by strong performance in the United States and Europe.

Within Medical Devices, sales grew 12.5% globally on an organic basis, including mid-teens growth in the United States and double-digit growth internationally. In Diabetes Care, sales of FreeStyle Libre grew more than 25% on an organic basis in the quarter, including approximately 50% growth in the United States and mid-teens growth internationally.

Abbott currently forecasts total organic sales growth, excluding the impact of COVID testing-related sales to be in the high-single digits for 2023.

Abbott Laboratories Price

Abbott Laboratories Price
Abbott Laboratories Price

Abbott Laboratories price | Abbott Laboratories Quote

Abbott’s first-quarter worldwide sales were down 18.1% year over year on a reported basis. Total sales were negatively impacted by COVID-19 testing-related sales decline. In Diagnostics, as forecast, sales growth was negatively impacted by a significant decrease in COVID testing sales compared with the first quarter of 2022. Worldwide COVID-19 testing sales were $730 million in the first quarter compared with $3.3 billion in the year-ago period. Further, in Core Lab Diagnostics, growth was partially offset by soft market conditions in China.

Challenging macroeconomic environment, adverse currency translation and stubborn inflationary situation severely impacted the company’s profitability in the first quarter. The ongoing inflation situation across the globe is adversely impacting input costs for Abbott.

Key Picks

Some better-ranked stocks in the broader medical space are Zimmer Biomet ZBH, Hologic, Inc. HOLX and Insulet PODD.

Zimmer Biomet, carrying a Zacks Rank #1 (Strong Buy) at present, has an earnings yield of 5.35% compared to the industry’s -2.55%. Zimmer Biomet’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 7.38%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Zimmer Biomet’s shares have increased 19.9% against the industry’s 25.2% decline in the past year.

Hologic, carrying a Zacks Rank #2 at present, has an earnings yield of 4.62% compared with the industry’s -7.01%. Shares of HOLX have risen 15.1% compared with the industry’s 9.8% rise over the past year.

HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 27.3%.

Insulet, carrying a Zacks Rank #2 at present, has an estimated growth rate of 56.4% for 2024. Insulet’s shares have risen 71.7% against the industry’s 25.2% decline over the past year.

PODD’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average surprise being 80.2%.

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