) reported first quarter 2014 earnings of 41 cents per share,
above the Zacks Consensus Estimate of 35 cents.
Earnings were down 2.4% from the year-ago quarter but above
the management's guidance range of 34-36 cents. Including
one-time items, first quarter earnings came in at 22 cents per
share, down from 34 cents in the year-ago quarter.
Abbott Labs generated sales of $5.2 billion in the first
quarter of 2014, down 2.5% year over year and short of the Zacks
Consensus Estimate of $5.4 billion.
The disruption in Abbott Labs' international nutrition
business in Aug 2013 and the timing of supply of key products in
Established Pharmaceuticals segment due to an expected plant
shutdown for capacity expansion purposes negatively impacted
sales by 2.6% points.
First Quarter in Detail
Abbott Labs operates through four segments, namely Established
Pharmaceuticals Division (EPD), Medical Devices, Diagnostics and
EPD sales declined 6.6% year over year to $1.1 billion
including a negative impact of 5.9% due to currency fluctuations.
Sales in key emerging markets edged up 0.2% on an operational
basis (excluding foreign currency fluctuations) driven by growth
in Brazil, Russia and China. However, sales from developed and
other markets declined 1.5% on an operational basis.
Even though sales in this division was impacted by the timing
of supply of key products in women's health portfolio due to an
expected plant shutdown for capacity expansion purposes, Abbott
Labs' expects sales growth from key emerging markets to
accelerate in 2014.
The Medical Devices business generated sales of $1.3 billion,
down 1.2% year over year. Diabetes Care sales were down 10.5% due
to the implementation of CMS or the competitive bidding for
Medicare patients in the U.S. The Vascular business was down 0.5%
despite continued uptake of drug eluting stent systems Xience
Xpedition and Absorb in key geographies.
On a positive note, Medical Optics business was up 7.6%.
Cataract sales, accounting for more than 65% of total Medical
Optics sales, outpaced the overall market and recorded
double-digit growth propelled by a number of new products
launched in 2013, including the Tecnis OptiBlue IOL in Japan and
the Tecnis Toric IOL in the U.S. along with further penetration
of the Catalys Precision Laser System for cataract surgery.
As expected, the Nutrition business was down 4.0% year over
year to $1.6 billion. Pediatric Nutrition sales declined 8.5% as
sales in this business were adversely impacted by a supplier
recall in early Aug 2013 in certain international markets. This
sales disruption is estimated to have reduced sales by
approximately $75 million in the first quarter in international
Pediatric Nutrition business. Adult Nutrition sales grew 2.2%,
driven by solid growth of its key brand Ensure.
Diagnostics business sales increased 2.6% 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 2.4%
and Point of Care Diagnostics increased 2.2%. Worldwide sales of
Molecular Diagnostics were up 4.6%.
2014 Outlook Reiterated
Abbott Labs continues to expect earnings per share in the
range of $2.16 to $2.26 in 2014. The Zacks Consensus Estimate
currently stands at $2.20 per share, well within the company's
guidance. Shares were up in
Abbott Labs currently carries a Zacks Rank #3 (Hold). Even
though earnings were above expectations in the first quarter,
sales fell short. The supply constraints in the EPD segment
continue to pull down the sales growth of the division. We were
disappointed by the disruption in international markets of the
Nutrition business which was one of the fastest growing
businesses for Abbott Labs. The disruption is likely to stretch
into the first half of 2014.
Nevertheless, Abbott Labs plans to launch a number of new
products globally in 2014 to recapture its lost market share in
the nutrition business, including a new infant formula, Eleva,
recently launched in China. The company intends to increase its
global capacity to meet demand with three new manufacturing
facilities scheduled to be operational in China, India and the
U.S. in the second quarter.
We believe that Abbott Labs is extremely diversified with its
presence in nutrition, diagnostics, generic pharmaceuticals and
medical devices markets after having separated its proprietary
pharmaceutical business into a new company called
) in early 2013.
Some better-ranked stocks in the healthcare sector include
). Both carry a Zacks Rank #2 (Buy).
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