Abbott (ABT) Q3 Earnings Top, Diagnostic Test Sales Solid

Zacks Equity Research
·5 min read

Abbott Laboratories ABT reported third-quarter 2020 adjusted earnings from continuing operations of 98 cents per share, which exceeded the Zacks Consensus Estimate by 8.9%. The adjusted figure improved 16.7% from the prior-year quarter.

The quarter’s adjustments include certain non-recurring intangible amortization expense and other expense primarily associated with acquisitions and restructuring actions among others.

Reported earnings from continuing operations came in at 69 cents, reflecting 30.2% rise year on year.

Third-quarter worldwide sales of $8.85 billion were up 9.6% year over year on a reported basis. The top line surpassed the Zacks Consensus Estimate by 4.7%. On an organic basis (adjusting for the impact of foreign exchange), sales improved 10.6% year over year in the reported quarter.

Quarter in Detail

Abbott operates through four segments — Established Pharmaceuticals Division (EPD), Medical Devices, Nutrition, and Diagnostics.

In the third quarter, EPD sales declined 9.3% on a reported basis (down 3.3% on an organic basis) to $1.09 billion. Organic sales in key emerging markets dropped 1.8%, year over year due to market softness across several countries as a result of the spread of COVID-19.

Medical Devices business sales improved 3.4% on a reported basis to $3.17 billion. On an organic basis, sales improved 2.6%. Barring Rhythm Management and Vascular,all other sub segments reported organic revenues growth in the quarter. According to the company, cardiovascular and neuromodulation sales growth and procedure volumes improved significantly as demand returned to more normalized levels.

In Diabetes Care, the company registered 25.2% organic growth, banking on solid worldwide adoption of FreeStyle Libre. This device alone registered global sales growth of 35.6% on an organic basis.

Abbott Laboratories Price, Consensus and EPS Surprise

Abbott Laboratories Price, Consensus and EPS Surprise
Abbott Laboratories Price, Consensus and EPS Surprise

Abbott Laboratories price-consensus-eps-surprise-chart | Abbott Laboratories Quote

Nutrition sales were up 2.6% year over year on a reported basis (up 4.1% on an organic basis), to $1.92 billion. Pediatric Nutrition sales declined 2.5% on an organic basis. Adult Nutrition sales improved 12.4% organically. According to the company, Adult Nutrition sales benefited from improved U.S. and international sales performance of Ensure, Abbott's market-leading complete and balanced nutrition brand. In Pediatric Nutrition, however, U.S. growth of Pedialyte and growth in Southeast Asia were offset by challenging conditions in Greater China.

Diagnostics sales were up 38.2%, year over year on a reported basis (up 38.8% on an organic basis) to $2.64 billion. Core Laboratory Diagnostics sales were up 0.8% on an organic basis. Molecular Diagnostics surged 313.6% on an organic basis. Rapid Diagnostics sales too improved 83% on an organic basis in the September-end quarter. However, Point of Care Diagnostics sales declined 9.7% on an organic basis.

2020 Guidance

The company updated its earnings guidance for 2020.

The company now projects adjusted earnings per share from continuing operations to be at least $3.55 for 2020 (earlier the expectation was $3.35 per share). The current Zacks Consensus Estimate is pegged at $3.30

Our Take

Abbott posted better-than-expected earnings and revenue numbers for the third quarter. Adjusted earnings and organic sales improved year over year as well.

Abbott has been riding high on a healthy growth graph within its Diabetes Care business. The company has also been in the limelight for developments in its flagship, sensor-based continuous glucose monitoring system, FreeStyle Libre System. Within Adult Nutrition too, the company gained from growing demand under the pandemic-led situation. Further, Molecular Diagnostics sales were extremely strong in the third quarter.

Zacks Rank & Key Picks

Currently, Abbott carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the same space include Insulet PODD, IDEXX Laboratories, Inc. IDXX and ResMed RMD.

The Zacks Consensus Estimate for Insulet’s third-quarter 2020 adjusted EPS is currently pegged at 6 cents. The consensus estimate for third-quarter revenues stands at $220.89 million. The company, which currently carries a Zacks Rank #1 (Strong Buy), is expected to release results soon. You can seethe complete list of today’s Zacks #1 Rank stocks here.

IDEXX currently carries a Zacks Rank #2. The Zacks Consensus Estimate for its third-quarter 2020 adjusted EPS is currently pegged at $1.41. The consensus estimate for third-quarter revenues stands at $666.7 million.

The Zacks Consensus Estimate for ResMed's first-quarter fiscal 2021 adjusted EPS is currently pegged at 95 cents. The consensus estimate for revenues stands at $702.4 million. It currently has a Zacks Rank #2.

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