) reported fourth quarter 2013 earnings of 58 cents per share, in
line with the Zacks Consensus Estimate.
Earnings increased 20.8% from the year-ago quarter. Including
one-time items, fourth quarter earnings came in at 37 cents per
share, down from 66 cents in the year-ago quarter.
Abbott Labs generated sales of $5.6 billion in the fourth
quarter of 2013, up 0.4% year over year, but fell short of Zacks
Consensus Estimate of $5.7 billion. The year-over-year growth was
primarily driven by the solid performance of the Diagnostics and
Medical Devices segments.
However, the disruption in Abbott Labs' international
nutrition business in Aug 2013 negatively impacted its fourth
quarter sales by 1.5% points. Moreover, unfavorable movement in
foreign exchange rates negatively impacted sales by 2.9%.
Total sales in 2013 came in at $21.8 billion, falling short of
the Zacks Consensus Estimate of $21.9 billion. Earnings per share
came in at $2.01 in 2013, in line with the Zacks Consensus
Fourth Quarter in Detail
Abbott Labs operates through four segments, namely Established
Pharmaceuticals Division (EPD), Medical Devices, Diagnostics and
sales declined 4.3% year over year to $1.3 billion including a
negative impact of 5.0% due to currency fluctuations. Sales in
key emerging markets increased 10.1% on an operational basis
(excluding foreign currency fluctuations) driven by growth in
Brazil, Russia and China.
However, sales from other markets declined 6.7% on an
operational basis due to weak market conditions, particularly in
Western Europe. Abbott Labs expects to focus on key
emerging markets in 2014.
business generated sales of $1.4 billion, up 2.0% year over year
mainly due to strong performance in the Medical Optics business,
which was up 10.9%. Cataract sales, accounting for more than 65%
of total Medical Optics sales, outpaced the overall market and
recorded double-digit growth.
The Vascular business was up 1.7% driven by the continued
uptake of drug eluting stent systems - Xience Xpedition and
Absorb in key geographies. However, Diabetes Care sales were down
4.4% due to the implementation of CMS or the competitive bidding
for Medicare patients in the U.S.
As expected, the
business was down 0.8% year over year to $1.7 billion. Pediatric
Nutrition sales, accounting for 55% of total nutrition sales,
declined 3.2% 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 $90 million in the fourth quarter in
international Pediatric Nutrition business.
Adult Nutrition sales grew 2.3%, driven by solid growth of its
key brand Ensure. Nevertheless, pediatric nutrition sales
from international markets are expected to recover in 2014.
business sales increased 5.9% 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 5.9% and Point of
Care Diagnostics increased 13.9%. However, worldwide sales of
Molecular Diagnostics were down 0.2%.
Abbott Labs expects earnings per share in the range of $2.16
to $2.26 in 2014. The Zacks Consensus Estimate currently stands
at $2.24 per share, well within the company's guidance. Shares
were down in pre-market trading.
In Oct 2013, Abbott Labs announced a 57% increase in its
quarterly dividend to 22 cents from 14 cents. The increased
dividend will be paid in Feb 2014. The company also expects to
repurchase shares of more than $2 billion in 2014.
Abbott Labs currently carries a Zacks Rank #3 (Hold). The year
2013 was challenging for Abbott Labs due to austerity measures in
developed markets and weak economic conditions on a global basis.
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, 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
) in early 2013.
The Medical Devices and Diagnostics business looks promising.
The new product launches in 2013 should drive growth going
forward. We are also impressed by the company's efforts to return
value to shareholders through share repurchases and
Some better ranked pharma stocks include
Lannett Company, Inc
). Both carry a Zacks Rank #1 (Strong Buy).
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