Abbott Labs Beats on Q2 Earnings and Sales, Boosts Guidance - Analyst Blog

By Mark Vickery,

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Abbott Laboratories ( ABT ) reported second quarter 2014 earnings of 54 cents per share, above the Zacks Consensus Estimate of 51 cents.

Earnings were up 17.4% from the year-ago quarter and also above management's guidance range of 50 cents to 52 cents. Including one-time items, second quarter earnings came in at 30 cents per share, flat year over year.

Abbott Labs generated sales of $5.55 billion in the second quarter of 2014, up 1.9% year over year (on a reported basis). Sales were impacted unfavorably by foreign exchange movements during the quarter. Quarterly sales were just above the Zacks Consensus Estimate of $5.52 billion.

Abbott Labs, which has lately been active on the acquisition/ collaboration front to drive growth, reported strong sales from the emerging markets.

Second Quarter in Detail

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

EPD sales declined marginally to $1.22 billion including a negative impact of 2.4% due to currency fluctuations. Sales in key emerging markets climbed 9.7% on an operational basis (excluding foreign currency fluctuations) driven by growth in Brazil, India and China. However, sales from developed and other markets declined 4.7% on an operational basis.

The Medical Devices business generated sales of $1.4 billion, up 1.2% year over year. Diabetes Care sales were down 9.8% due to the implementation of CMS or the competitive bidding for Medicare patients in the U.S. The Vascular business was up 1.9% driven by strong international sales. We note that more than 60% of sales from the Vascular business came from international markets during the quarter.

The Medical Optics business was up 12.2%. Cataract sales, accounting for almost 70% of total Medical Optics sales, outpaced the overall market and recorded double-digit growth propelled by multiple new product launches.

The Nutrition business improved 1.6% year over year to $1.7 billion. Pediatric Nutrition sales declined marginally during the quarter. Sales in this business were adversely impacted by a supplier recall in early Aug 2013 in certain international markets. Adult Nutrition sales grew 4.4%, driven by solid growth of its key brand Ensure. Strong performance in the emerging markets also aided results.

Diagnostics business sales increased 4.8% year over year to $1.2 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 5.8% and Point of Care Diagnostics rose 3.7%. Worldwide sales of Molecular Diagnostics were down 2.1%. Sales were adversely impacted by the timing of tenders in the infectious disease business in multiple emerging markets.

2014 Earnings Outlook Raised

Abbott now expects earnings per share in the range of $2.19 to $2.29 in 2014 (old guidance $2.16 to $2.26). The Zacks Consensus Estimate currently stands at $2. 21 per share, within the company's guidance. Shares were up in pre-market trading reflecting investors' enthusiasm about better-than-expected results and improved guidance.

We note that the guidance includes the developed markets generics pharmaceutical business which Abbott agreed to sell to Mylan ( MYL ) for $5.3 billion. The deal is expected to close in the first quarter of 2015.

Abbott Labs carries a Zacks Rank #3 (Hold). Better ranked large cap stocks include Allergan ( AGN ) and AbbVie ( ABBV ). Both stocks sport a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Stocks: EPD , AGN , MYL , ABBV

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