Yahoo Finance Abbott Laboratories (NYSE:ABT) Q1 2024 Earnings Call Transcript
Abbott Laboratories (NYSE:ABT) Q1 2024 Earnings Call Transcript April 17, 2024
Abbott Laboratories isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Robert Ford - Chairman and Chief Executive Officer:
Phil Boudreau - Senior Vice President, Finance and Chief Financial Officer:
Bob Funck - Executive Vice President, Finance:
Operator: Good morning, and thank you for standing by. Welcome to Abbott's First Quarter 2024 Earnings Conference Call. All participants will be able to listen-only until the question-and-answer portion of this call. [Operator Instructions] This call is being recorded by Abbott. With the exception of any participants’ questions asked during the question-and-answer session, the entire call, including the question-and-answer session is material copyrighted by Abbott. It cannot be recorded or rebroadcast without Abbott's expressed written permission. I would now like to introduce Mr. Mike Comilla, Vice President, Investor Relations.
Mike Comilla: Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer; Bob Funck, Executive Vice President, Finance; and Phil Boudreau, Senior Vice President, Finance and Chief Financial Officer. Robert and Phil will provide opening remarks. Following their comments, we'll take your questions. Before we get started, some statements made today may be forward-looking for purposes of the Private Securities Litigation Reform Act of 1995, including the expected financial results for 2024. Abbott cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements.
Economic, competitive, governmental, technological, and other factors that may affect Abbott's operations are discussed in Item 1A, Risk Factors, to our annual report on Form 10-K for the year ended December 31, 2023. Abbott undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law. On today's conference call, as in the past, non-GAAP financial measures will be used to help investors understand Abbott's ongoing business performance. These non-GAAP financial measures are reconciled with the comparable GAAP financial measures in our earnings news release and regulatory filings from today, which are available on our website at abbott.com.
Note, that Abbott has not provided the GAAP financial measure for organic sales growth on a forward-looking basis because the Company is unable to predict future changes in foreign exchange rates, which could impact reported sales growth. Unless otherwise noted, our commentary on sales growth refers to organic sales growth, which is defined in the press release issued earlier today. With that, I will now turn the call over to Robert.
Robert Ford : Thanks, Mike. Good morning everyone, and thank you for joining us. Today, we reported first quarter adjusted earnings per share of $0.98, which was above analyst consensus estimates. We also raised the midpoint of our guidance ranges for both earnings per share and sales growth. We now forecast full year adjusted earnings per share of $4.55 to $4.70 and organic sales growth, excluded COVID testing related sales of 8.5% to 10%. Organic sales growth, excluding COVID testing related sales was 10.8% in the quarter, which represents the fifth consecutive quarter of double-digit growth. The strong start to the year was driven by broad base growth across a portfolio, including growth of 14% in medical devices and established pharmaceuticals.
In addition to exceeding expectations of both top and bottom lines this quarter, we accomplished a number of objectives across the pipeline, including obtaining several new product approvals and achieving important clinical trial related milestones. I'll now summarize our first quarter results in more detail before turning the coal over to Phil, and I'll start with nutrition, where sales increased 8% in the quarter. Strong growth in the quarter was led by double-digit growth in pediatric nutrition, driven by continued market share gains in the U.S. infant formula business and growth across our international portfolio of infant formula, toddler and adult nutrition brands. In January, we launched a new nutrition shake called PROTALITY, which provides nutritional support for adults pursuing weight loss.
As people eat less and lose weight from taking GLP-1 medications, undergoing a weight loss surgery, or following a calorie restricted diet. A portion of what is lost is lean muscle mass, which plays an important role in overall health. Combination of high protein and essential vitamins and minerals that totality offers can help people preserve muscle while pursuing their personal weight loss goals. Turning to EPD or sales increased 14% in the quarter. This quarter was a continuation of EPDs impressive trend of strong performance, including double-digit growth in four of the last five quarters. In addition to a strong track record of top line growth, this business has delivered equally impressive gains on the bottom line with an operating margin profile last year that reflected more than 350 basis points of improvement compared to 2019.
Moving to diagnostics, where sales increased more than 5%, excluding COVID testing sales. Growth in diagnostics continues to be led by the adoption of our market leading systems and demand for testing that takes place in a variety of settings, including hospitals, laboratories, urgent care centers, physician offices, retail pharmacies, and blood screening facilities. Our development efforts and diagnostics focus on developing new systems and creating new tests that play an important role in making healthcare decisions, expand the accessibility of testing and deliver a result as fast as possible. In April, we received FDA approval for a point of care diagnostic test that could help determine if someone suffered a mild traumatic brain injury or concussion in just 15 minutes.
The test is run on our portable i-STAT Alinity instrument, which allows concussion testing to move beyond the traditional hospital setting and into urgent care centers, physician offices, and other locations that are closer to the patient, with nearly 5 million people in the U.S. going to the emergency room to be checked for suspected concussion each year. We believe this test has the potential to transform the standard of care for concussion testing, and I will wrap up with medical devices, where sales grew 14% in diabetes care. FreeStyle Libre sales were $1.5 billion in the quarter and grew 23%. As I previously mentioned, that Libre has several new growth opportunities that will help continue to fuel the strong sales trajectory we have forecasted.
One of those growth opportunities relates to the continued expansion of reimbursement coverage for Libre, for individuals who use basal insulin therapy to manage their diabetes. Last year, we announced that Libre became the first and only continuous glucose monitoring system to be nationally reimbursed in France to include all people, who use basal insulin as part of their diabetes management. During this first quarter, Libre obtained reimbursement from a select number of institutional payers in Germany for basal insulin users who also use oral diabetes medication to manage their condition. These select public and private payers cover a limited number of the approximately 1 million basal insulin users in Germany, but this is an encouraging sign of the potential for further coverage expansion not only in Germany but across other European markets.
In cardiovascular devices, sales grew 10.5% overall in the quarter, led by double-digits growth in electrophysiology, structural heart and continued acceleration in our cardiac Rhythm Management and Vascular portfolios. In electrophysiology, sales grew 18%, driven by double-digits growth in all major geographic regions and across all major product categories, including double-digits growth in ablation catheters and cardiac mapping related products. We continue to make great progress toward bringing our innovative PFA catheter, Volt to market. In March, we completed enrollment in our CE Mark clinical study, putting us on-track to file for international approval before the end of the year. We also recently began enrolling patients in our U.S. clinical trial called VOLT-AF, which will generate the data needed to support an FDA approval filing.
In structural heart, growth of 13% was led by strong performance in several high-growth areas, including TAVR, LAA, mitral and tricuspid repair. Structural heart is an area that we have invested in over the past years in order to create a diversified portfolio that can sustainably deliver double-digits growth. In the past, we relied almost exclusively on MitraClip to drive the growth, but today the portfolio and growth are more balanced and reflect increasing contributions from newer products like Navitor, Amulet and TriClip. In April, we received FDA approval for TriClip, a first of its kind heart valve repair device designed for the treatment of tricuspid regurgitation or a leaky tricuspid valve. Data from the clinical trial supporting this approval demonstrated that, patients who receive TriClip experienced a significant improvement in the severity of their symptoms and quality of life.
We are excited to now offer this life-changing treatment option to people in the United States that suffer from this condition. In Rhythm Management, growth of 7.5% was led by AVEIR, our recently launched leadless pacemaker. AVEIR has rapidly captured market share in the single chamber pacing segment of the market and is now being used for dual chamber pacing, which is the largest segment of the pacing market. This revolutionary technology is helping to deliver growth rates in our Rhythm Management business that significantly exceed the overall growth in this market. And lastly, in neuromodulation, sales grew 17%, driven by Eterna, a rechargeable neurostimulation device for pain management. In January, we announced the launch of Liberta, the world's smallest rechargeable deep brain stimulation device, which is used to treat movement disorders such as Parkinson's disease.
In summary, we're off to a very good start to the year, exceeding expectations on both top and bottom lines. And as a result, we have raised the midpoint of our sales and EPS guidance ranges. We continue to make good progress on our gross margin expansion initiatives and we're seeing strong returns from the investments we are making across our growth platforms. Our pipeline has continued to be highly productive, delivering several recently new product approvals and we're very well-positioned to continue to deliver strong results for the remainder of the year, and I'll turn over the call to Phil.
Phil Boudreau: Thanks, Robert. As Mike mentioned earlier, please note that all references to sales growth rates unless otherwise noted, are on an organic basis. Turning to our first quarter results, sales increased 4.7% on an organic basis, which as expected includes the impact of year-over-year decline in COVID testing related sales. Excluding COVID testing sales underlying base business, organic sales growth was 10.8% in the quarter. Foreign exchange had an unfavorable year-over-year impact of 2.9% on first quarter sales. During the quarter, we saw the U.S. dollar strengthen versus several currencies, which resulted in exchange having a more unfavorable impact on sales compared to exchange rates at the time of our earnings call in January.
Regarding other aspects of the P&L, the adjusted gross margin ratio was 55.7% of sales, adjusted R&D was 6.7% of sales and adjusted SG&A was 29.4% of sales in the first quarter. Lastly, our first quarter adjusted tax rate was 15%. Turning to our outlook for the full year, we now forecast full year adjusted earnings per share of $4.55 to $4.70, which represents an increase at the midpoint of the range compared to the guidance range we provided in January. We also raised the midpoint of our guidance for organic sales growth. We now forecast organic sales growth, excluding COVID testing to be in the range of 8.5% to 10%. Based on current rates, we expect exchange to have an unfavorable impact of approximately 2.5% on full year reported sales, which includes an expected unfavorable impact of approximately 3% on second quarter reported sales.
Lastly, for the second quarter, we forecast adjusted earnings per share of $1.08 to $1.12. With that, we'll now open the call for questions.
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