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Will Currency Hit Abbott Laboratories (ABT) in Q3 Earnings?

Abbott LaboratoriesABT is scheduled to report third-quarter 2015 results before the opening bell on Oct 21, 2015.

Abbott Labs has an impressive track record with the company beating estimates in each of the trailing four quarters with an average earnings surprise of 5.91%. Let us see how things are shaping up for this announcement.

Will Currency Impact Continue?

Although the nutrition business continues to drive revenues, with the company expanding its pediatric nutrition portfolio through new product launches in the U.S. and the ex-U.S. markets (including the launch of a non-GMO labeled formula, Similac Advance, in the U.S. and the organic version of an infant formulation, Eleva, in China), performance of the adult nutrition business remains a matter of concern. While the company is working on growing the adult nutrition business in the priority international markets, the segment is facing competition in the U.S. and low demand at the institutional level.

For the third quarter, the company expects the global nutritional business to grow in the mid single digits on an operational basis, mainly driven by performance in the international markets. Both the global diabetes care and medical optics businesses are expected to grow in the low single digit this quarter. The established pharmaceuticals division is expected to continue to generate double-digit sales growth.

The company expects third-quarter earnings in the range of 52 centsāˆ’54 cents per share, reflecting double-digit growth. However, the top line may be adversely affected by currency fluctuation of above 9% during the third quarter, leading to sales growth in the low single digits. Operational sales growth is expected in the low double digits.

What Our Model Indicates

Our proven model does not conclusively shows that Abbott Labs is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to likely post an earnings beat. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at -1.83%. This is because the Most Accurate estimate stands at 52 cents, while the Zacks Consensus Estimate is 53 cents.

Zacks Rank: Abbott Labs currently carries a Zacks Rank #4 (Sell). The company's Zacks Rank #4 when combined with an earnings ESP of -1.83% makes a surprise prediction difficult.

Moreover, we caution against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revision.

Stocks That Warrant a Look

Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Amgen Inc. AMGN has an Earnings ESP of +1.27% and carries a Zacks Rank #1 (Strong Buy). The company is scheduled to release third-quarter 2015 results on Oct 28.

The Earnings ESP for Bristol-Myers Squibb Company BMY is +2.86% and it carries a Zacks Rank #3. The company is scheduled to release third-quarter results on Oct 27.

Eli Lilly and Company LLY has an Earnings ESP of +2.67% and carries a Zacks Rank #3. The company is scheduled to release third-quarter 2015 results on Oct 22.

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BRISTOL-MYERS (BMY): Free Stock Analysis Report

LILLY ELI & CO (LLY): Free Stock Analysis Report

AMGEN INC (AMGN): Free Stock Analysis Report

ABBOTT LABS (ABT): Free Stock Analysis Report

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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.


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

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