Earnings Roundup: Abbott Labs

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Earnings Roundup: Abbott Labs

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Abbott Labs Driving Abbott’s success: Adult nutrition sales. Diagnostic products. Future growth opportunity: Emerging markets. Easing YoY comps.

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Driving Abbott’s revenue First, let’s consider Abbott’s revenue sources. 4 business segments: Nutritional products (pediatric & adult). Diagnostic products (systems & testing). Vascular devices/products (stents & other products). Established pharmaceutical (generics).

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Driving Abbott’s revenue Revenue breakdown Sales up 3% operational; 2% including currency. Emerging market revenue up nearly 8% from a year ago. Results are ahead of internal forecasts in the first half. Sales are expected to accelerate in the second half. Guiding for full year mid single digit sales growth this year; low single digits including currency.

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Driving Abbott’s revenue Revenue breakdown continued:

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Nutritional products (pediatric & adult) Expect to return to double digit growth in the second half. Easing comparisons versus recall last year. Recapturing market share. Recall related sales impact of $40 million in Q2, or 7%. Int’l adult sales up 10%. Expanding presence in China.

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Medical devices Sales essentially unchanged at +0.8% ex-currency. Optical sales offsetting diabetes. Optical revenue up 12.2% to $314 million. Cataract products represent nearly 70% of vision sales. Diabetes care down 10% to $294 million. CMS reimbursement headwind. Vascular sales up 1.4% ex-currency. Endovascular sales up 13.3% ex-currency. Supera peripheral stent demand strong.

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Established pharmaceuticals Sequential sales improvement. Emerging market revenue up nearly 10%. India, Brazil, and China momentum continuing in 2H14. Developed market sales down 5%. Developed market brand drug business combination with Mylan. Abbott will own 21% of combined new company. Plans to exit position over time. Provides cash for future deals.

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Diagnostics Early entry into China, Russia, and Brazil. Double digit growth in emerging markets. U.S. diagnostics business up 5.5%. Core lab sales up 7%. U.S. up 11% on market share wins.

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Earnings impact   Earnings per share of $0.54; above guidance range and up 17%. Adjusted gross margin ratio was 55.3% of sales, ahead of guidance due to improvement in diagnostics. Operating margin (TTM) stabilizing and trending higher.

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Earnings guidance   Adjusted gross margin of ~55% for full year. Full year adjusted operating margin improvement of 1%. Above prior 60 bps guidance. Upped EPS range to between $2.19 and $2.29. Prior guidance was for between $2.16 and $2.26. Reflects double digit EPS growth at the midpoint.

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Fool-worthy thoughts Nutrition revenue headwind should ease in the second half. Faster YoY growth rate through mid 2015. Diagnostic demand should climb due to boomers and reform. Device demand will remain challenging/highly competitive. Ongoing opportunity for cataract growth tied to demographics. Deal with Mylan removes slow growth developed market business. Impact on EPS early, but faster growth rates thereafter.

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Six stock picks poised for incredible growth Six stock picks poised for incredible growth Six stock picks poised for incredible growth Faster growth should help Abbott’s dividend, but even Abbott may have trouble keeping up with these top dividend stocks.