Abbott (ABT) Diagnostic and Nutrition Arms Grow Worldwide

Abbott Laboratories ABT has been delivering consistent organic growth in the Established Pharmaceuticals Division (EPD) and Diabetes segments. The stock currently carries a Zacks Rank #2 (Buy).

Over the past year, Abbott has been outperforming the industry it belongs to. The stock has rallied 17.2% against the industry’s 6.9% fall.

The company posted better-than-expected earnings and revenues for the third quarter of 2021. Overall, year-over-year improvements were robust. Excluding COVID-19 testing-related sales, which totaled $1.9 billion in the quarter, organic sales increased 12% year over year.

Even though COVID-19 case rates surged in the United States and other geographies during the third quarter, the company registered strong growth in its more consumer-facing businesses like nutrition, established pharmaceuticals and diabetes care. This mitigated the modest impacts of the pandemic that Abbott witnessed from the surge in cases in certain areas of its hospital base businesses.

In the third quarter, within Nutrition, strong growth was led by U.S. pediatric and international adult nutrition. In Pediatric Nutrition, ABT registered strong growth in the United States from continued share gains in the infant formula and toddler portfolio. Sales of Pedialyte, the company’s market-leading rehydration brand, once again rose in strong double digits. This was driven by the solid market uptake of several recently launched products as well as investments in direct consumer promotion. In Adult Nutrition, there was mid-teens growth internationally on strong demand for Ensure and Glucerna brands, including new users entering these categories, with existing customers increasing their usage.

Abbott Laboratories Price

Abbott Laboratories price | Abbott Laboratories Quote

Within Diagnostics, sales increased more than 45%, led by the growing demand for Abbott’s portfolio of COVID-19 tests as well as an improvement in the base business. During the quarter, as the Delta variant spread and COVID-19 cases surged, particularly in the United States, demand for testing, especially the rapid tests, increased significantly. Within the EPD, third-quarter sales rose more than 15% year over year, led by double-digit growth in China, Russia and India. This, in turn, led to overall sales growth of 18% in key emerging markets.

Abbott has a consistent record of paying dividends, with five-year annualized dividend growth being 12.72%.

On the flip side, with a spike in new COVID-19 cases through the third quarter, Abbott noted modest impacts in its base business. There was some softness as the Delta variant spread and new cases increased in the United States, particularly in August and throughout September. This led to a slowdown in the company’s hospital base business in certain areas.

Further, Abbott’s Neuromodulation arm reported an 8.3% year-over-year decline on an organic basis in the third quarter. Abbott noted that being extremely elective, this business has had a hard post-COVID recovery. The company currently is not much hopeful about a rebound in the fourth quarter within this business.

Key Picks

Some other top-ranked stocks from the broader medical space are Thermo Fisher Scientific Inc. TMO, McKesson Corporation MCK and NextGen Healthcare, Inc. NXGN.

Thermo Fisher’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 9.02%. The company currently carries a Zacks Rank of 2.

Thermo Fisher’s long-term earnings growth rate is estimated at 14%. TMO’s earnings yield of 3.7% compares favorably with the industry’s 3.6%.

McKesson’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 19.9%. The company currently carries a Zacks Rank #2.

McKesson’s long-term earnings growth rate is estimated at 8.9%. MCK’s earnings yield of 9.9% compares favorably with the industry’s 3.2%.

NextGen Healthcare’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 16%. The company currently carries a Zacks Rank of 2.

NextGen Healthcare’s long-term earnings growth rate is estimated at 8.5%. NXGN’s earnings yield of 5.9% compares favorably with the industry’s 4.1%.

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