Abbott (ABT) Down 4.4% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Abbott (ABT). Shares have lost about 4.4% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Abbott due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Abbott Posts Q2 Earnings Beat on Strong Segmental Sales
Abbott reported second-quarter 2019 adjusted earnings from continuing operations of 82 cents per share, beating the Zacks Consensus Estimate by 2.5%. The bottom line improved 12.3% year over year and remained above the company’s guided range of 79-81 cents. Reported earnings from continuing operation in the quarter came in at 56 cents, a 36.6% surge from the year-ago quarter.
Second-quarter worldwide sales came in at $7.98 billion, up 2.7% year over year on a reported basis. The top line missed the Zacks Consensus Estimate by 0.1%.
On an organic basis (adjusting for the impact of foreign exchange as well as certain acquisitions and divestments), sales increased 7.5% year over year in the reported quarter.
Quarter in Detail
Abbott operates through four segments, namely Established Pharmaceuticals Division (EPD), Medical Devices, Nutrition and Diagnostics.
In the second quarter, EPD sales dropped 1.8% on a reported basis (improved 6.1% on an organic basis) to $1.11 billion. This included a 7.9% adverse impact from currency fluctuations. Sales in the key emerging markets declined 1.4% year over year on a 9.3% adverse impact of foreign exchange. Organically, sales improved 7.9% in this market.
The Medical Devices business sales increased 6.4% on a reported basis to $3.08 billion. On an organic basis, sales grew 10.5%.
Cardiovascular and Neuromodulation sales reportedly (up 5.6% on an organic basis) rose 2.1% on double-digit growth in Electrophysiology, Heart Failure and Structural Heart. In Electrophysiology, growth was led by strong performance in cardiac diagnostic and ablation catheters.
Heart Failure sales growth was 24.6% organically, driven by strong market adoption of Abbott's HeartMate 3 left ventricular assist device following its FDA approval as a destination therapy in late 2018.
Within Structural Heart, the company registered 16.6% organic growth on a year-over-year basis driven by strong performance in several product areas across Abbott's broad portfolio, including MitraClip device.
Diabetes Care sales improved 23.9% (up 35.3% organically), buoyed consistent consumer uptake of FreeStyle Libre, the revolutionary continuous glucose monitoring system of Abbott.
Nutrition sales were up a marginal 0.9% year over year on a reported basis (up 5.1% on an organic basis) to $1.88 billion. Pediatric Nutrition sales increased 2.9% on an organic basis. Adult Nutrition sales were up 7.9% organically.
Diagnostics sales were up 1.7% year over year on a reported basis (up 6.2% on a comparable operational basis) to $1.91 billion. Core Laboratory Diagnostics sales grew 9.4% while Molecular Diagnostics slipped 9.3%, on an organic basis. Point of Care Diagnostics sales were up 5.7%. Rapid Diagnostics sales improved 2.8% on an organic basis in the second quarter led by infectious disease testing in developed markets and cardio-metabolic testing globally.
For the full year, adjusted earnings from continuing operations have been raised to a new band of $3.21-$3.27 from the earlier-provided range of $3.15-$3.25. The Zacks Consensus Estimate of $3.22 remains within this projected range. The company also projects 2019 organic sales growth of 7-8%.
The company has also provided third-quarter 2019 adjusted earnings per share outlook. It expects to report adjusted earnings from continuing operations in the range of 83-85 cents. The consensus mark of 85 cents falls at the upper end the predicted range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
At this time, Abbott has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision has been net zero. Notably, Abbott has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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