) reported third quarter 2013 earnings of 55 cents per share,
beating the Zacks Consensus Estimate of 51 cents.
Earnings increased 31.0% from the year-ago quarter, beating
management's guidance range of 51-53 cents. Including one-time
items, third quarter earnings were 49 cents per share, up from 21
cents in the year-ago quarter.
Abbott Labs generated sales of $5.4 billion in the third
quarter of 2013, up 2.0% year over year, and in line with the
Zacks Consensus Estimate.
The year-over-year growth was primarily driven by the solid
performance of the Diagnostics and Medical Devices segments.
However, sales in the third quarter were adversely impacted by
the disruption in international Nutrition sales. Moreover,
unfavorable movement in foreign exchange rates negatively
impacted sales by 2.3%.
Quarter in Detail
Abbott Labs operates through four segments, namely Established
Pharmaceuticals Division (EPD), Medical Devices, Diagnostics, and
EPD sales declined 2.9% year over year to $1.2 billion
including a negative impact of 3.5% due to currency fluctuations.
This division primarily focuses on 14 key emerging markets where
sales declined 3.4%.
Although recent macroeconomic factors and market pressure in
certain emerging markets have resulted in somewhat slower sales
growth in the third quarter, Abbott Labs expects growth rates in
the emerging markets to continue to outpace the overall global
economy and remain attractive in the long run. Sales in other
markets including developed markets like Western Europe and
Japan, among others declined 2.4%.
The Medical Devices business generated sales of $1.3 billion,
up 1.9% mainly due to a strong performance in the Medical Optics
business, which was up 7.3%. Cataract sales, accounting for 60%
of total Medical Optics sales, outpaced the overall market and
recorded double digit growth. The vascular business was up 0.6%
driven by the continued uptake of drug eluting stent systems -
Xience Xpedition and Absorb in key geographies. Diabetes Care
sales were up 0.4% driven by growth in the emerging markets.
The Nutrition business grew 1.9% year over year to $1.6
billion. Pediatric Nutrition sales, accounting for 55% of total
nutrition sales, grew 1.9% as sales in this business were
adversely impacted by a supplier recall in early Aug 2013 in
certain international markets. Adult Nutrition sales grew 2.0%
led by solid growth from its key brand Ensure. Pediatric
Nutrition sales from international markets are projected to be
lower than previous expectations in the fourth quarter of 2013
and in the first half of 2014.
Diagnostics business sales increased 8.0% year over year to
$1.1 billion. Key areas of focus in this division include the
Core Laboratory Diagnostics, Molecular Diagnostics, and Point of
Care Diagnostics businesses. Core Laboratory sales increased 6.3%
and Point of Care Diagnostics increased 16.5%. Worldwide sales of
Molecular Diagnostics increased 15.0%.
2013 Outlook Reiterated
Abbott Labs continues to expect earnings per share in the
range of $1.98 to $2.04 in 2013. The Zacks Consensus Estimate
currently stands at $2.00 per share, well within the company's
guidance. Shares were up in pre-market trading.
Concurrent with the third quarter results, Abbott Labs
announced a 57% increase in its quarterly dividend to 22 cents
from 14 cents. The increased dividend will be paid in Feb
Abbott Labs currently carries a Zacks Rank #3 (Hold). Although
earnings beat expectations, we were disappointed by the
disruption in international markets of the Nutrition business.
The disruption is likely to stretch into the first half of 2014.
We note that the Nutrition division is the company's fastest
growing business and hence a disruption in business will impact
growth rates going forward.
Moreover, the business environment is likely to be challenging
for Abbott Labs in the EPD segment due to austerity measures in
developed markets and weak economic conditions elsewhere.
Nevertheless, we believe that Abbott Labs is extremely
diversified with a presence in nutrition, diagnostics, generic
pharmaceuticals and medical devices markets after having
separated its proprietary pharmaceutical business into a new
) in early 2013.
We are also impressed by the company's recent efforts to
further broaden its expansive portfolio. During the third
quarter, Abbott Labs completed the previously announced
acquisition of OptiMedica in a bid to expand its vision care
business into the rapidly developing laser-assisted cataract
surgery market. The company also acquired IDEV Technologies to
broaden its existing portfolio of endovascular products designed
to treat patients with peripheral artery disease.
Right now, other large-cap pharma stocks like
) look attractive. Both carry a Zacks Rank #2 (Buy).
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