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Abbott Laboratories (ABT) Earnings Insights: Will the Medical Stock Build Investor Confidence?

Considering Abbott Laboratories' (ABT) recent strategic collaborations and acquisitions to boost the company’s long-term growth, could the stock be a compelling buy as we approach its fiscal third-quarter earnings release? Let's find out...

Abbott Laboratories (ABT), boasting a market capitalization of $159.97 billion, spearheads the global arena of healthcare product innovation. Its multifaceted operations are partitioned into four key segments: Established Pharmaceutical Products; Diagnostic Products; Nutritional Products; and Medical Devices.

ABT is scheduled to release its fiscal third-quarter financial results on October 18. Wall Street expects the company to report earnings of $1.10 per share for the quarter. Its revenue for the quarter is expected to come in at $9.82 billion. In addition, I have evaluated what makes the investment case strong for ABT in this article.

Before delving into ABT’s financials, let's take a look at the recent developments that position the company well for growth.

On September 22, ABT finalized its acquisition of Bigfoot Biomedical, a pioneering force in crafting intelligent insulin management systems for individuals grappling with diabetes. The strategic move bolsters ABT's position in the realm of diabetes care, enhancing its renowned FreeStyle Libre® array of continuous glucose monitoring technology.

This would expand the company's product portfolio, enhancing its competitiveness and catering to the growing demand for personalized and precise diabetes management solutions, propelling its growth prospects.

On September 20, ABT unveiled a strategic partnership with mAbxience Holdings S.L., a prominent biotech leader in Spain, to market multiple biosimilars targeting oncology, women's health, and respiratory ailments in emerging markets.

The collaboration would amplify ABT's pharmaceutical repertoire in emerging markets. It would also bolster the company's existing collection of branded generic medications with cutting-edge biosimilars, reinforcing its commitment to offering a comprehensive range of healthcare solutions.

Shares of ABT gained 1.4% intraday to close the last trading session at $92.18.

Here are the financial aspects of ABT that could influence its performance in the near term:

Impressive Historical Growth

Over the past three years, ABT’s revenue and EBITDA increased at a CAGR of 8.6% and 9.9%, respectively. Its net income and EPS grew at respective CAGRs of 18.4% and 19.1% over the same period. In addition, the company’s total assets and levered free cash flow rose at a CAGR of 2.2% and 7.4%, respectively, during the same time frame.

Upbeat Analyst Estimates

The consensus revenue estimate of $10.29 billion for the fiscal fourth ending December 2023 reflects a 2% year-over-year improvement. Likewise, the consensus EPS estimate of $1.19 for the same quarter indicates a 15.8% rise from the previous year. Moreover, the company topped the consensus revenue and EPS estimates in all four trailing quarters, which is impressive.

Dividend Growth

ABT has increased its dividends for ten consecutive years. It pays a $2.04 per share dividend annually, which translates to a 2.21% yield on the current price level. Its dividend has grown at a 12.3% CAGR over the past three years, and its four-year average dividend yield is 1.57%.

Robust Profitability

ABT’s trailing-12-month EBITDA margin of 24.64% is 371.3% higher than the industry average of 5.23%. Also, the stock’s trailing-12-month levered FCF margin of 14.19% compares with the 0.55% industry average. Furthermore, its trailing-12-month asset turnover ratio of 0.55x is 42.5% higher than the industry average of 0.38x.

POWR Ratings Show Promise

ABT’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. ABT has a B grade for Stability, consistent with its 24-month beta of 0.76. In addition, the stock has a B grade for Sentiment, justified by its upbeat analyst estimates.

ABT is ranked #25 in the 143-stock Medical - Devices & Equipment industry. Click here to access ABT’s Growth, Value, Momentum, and Quality ratings.

Bottom Line

ABT's recent strategic collaborations and acquisitions are poised to substantially augment its healthcare portfolio, spanning diabetes care and pharmaceuticals in emerging markets. These ventures hold the potential to further enrich the company's product range and market influence, propelling its overall growth prospects.

Coupled with robust profitability and an attractive dividend, ABT could be an ideal buy in anticipation of its forthcoming third-quarter earnings report.

How Does Abbott Laboratories (ABT) Stack Up Against Its Peers?

While ABT has an overall grade of B, equating to a Buy rating, you may also check out these other A-rated stocks within the Medical - Devices & Equipment industry: MediPal Holdings Corporation (MAHLY), FONAR Corporation (FONR) and Electromed, Inc. (ELMD). For exploring more A-rated Medical - Devices & Equipment stocks, click here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

ABT shares were trading at $92.51 per share on Tuesday afternoon, up $0.33 (+0.36%). Year-to-date, ABT has declined -14.05%, versus a 15.64% rise in the benchmark S&P 500 index during the same period.

About the Author: Aanchal Sugandh

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.


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