Healthcare giant Abbott Laboratories (ABT - Get Rating) has increased its projected adjusted EPS from $5.17 to $5.23 for 2022. “Our results and increased guidance in the current macroeconomic environment reflect the strength of our diversified business model and execution,” Robert B. Ford, ABT’s Chairman and CEO, said.

He added, “We’re particularly pleased with improving sales growth rates in U.S. Medical Devices, which is being fueled by several recent product launches, as well as continued strong performance in Established Pharmaceuticals.”

Additionally, ABT has paid dividends for 33 consecutive years. Its dividend payouts have grown at a 12.1% CAGR over the past five years and a 13.7% CAGR over the past three years. Its current dividend yield is 1.91%, while its four-year average yield is 1.49%.

ABT has lost 2.4% over the past month to close the last trading session at $98.29. It has lost 30.2% year-to-date and 22.4% over the past year. However, Wall Street analysts expect the stock to hit $118.21 in the near term, indicating a potential upside of 20.3%.

Here is what could shape ABT’s performance in the near term:

Solid Financials

ABT’s net sales came in at $33.56 billion for the nine months that ended September 30, 2022, up 6.2% year-over-year. Its adjusted net earnings came in at $7.66 billion, up 9.3% year-over-year, while its adjusted EPS came in at $4.31, up 10.8% year-over-year. Also, its operating earnings came in at $7.06 billion, up 16.7% year-over-year.

Attractive Valuations

ABT’s forward EV/EBIT of 15.84x is 2.5% lower than the industry average of 16.25x. Its forward Price/Sales of 3.99x is 5.8% lower than the industry average of 4.24x. Moreover, its forward Price/Cash Flow of 13.83x is 13.4% lower than the industry average of 15.97x.

Robust Profitability Margins

ABT’s trailing-12-month gross profit margin of 57.19% is 4.96% higher than the industrial average of 54.49%. Its trailing-12-month EBITDA and net income margins of 29.14% and 17.52% are higher than the industrial averages of 3.29% and negative 2.85%, respectively.

In addition, its trailing-12-month ROCE, ROTC, and ROTA of 22.17%, 11.46%, and 10.63%, compared with the industry averages of negative 38.67%, 21.39%, and 29.59%, respectively.

POWR Ratings Reflect Promising Outlook

ABT has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

The stock has a B grade for Quality, consistent with its higher-than-industry profitability margins. It has a B grade for Stability, in sync with its 24-month beta of 0.63.

In the 142-stock Medical – Devices & Equipment industry, ABT is ranked #8.

Click here for the additional POWR Ratings for ABT (Growth, Value, Momentum, and Sentiment).

View all the top stocks in the Medical – Devices & Equipment industry here.

Bottom Line

ABT delivered a steady performance in its last reported quarter. Moreover, its EPS is expected to increase by 11% per annum for the next five years. Also, it surpassed EPS estimates in all four trailing quarters.

Although the stock has been declining in price lately, given its robust profitability and growth potential, ABT seems poised to deliver solid returns over time. Thus, it might be an ideal Buy this fall.

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

While ABT has an overall POWR Rating of B, one might consider looking at its industry peers, FONAR Corporation (FONR - Get Rating), Electromed, Inc. (ELMD - Get Rating), and Utah Medical Products, Inc. (UTMD - Get Rating), which have an overall A (Strong Buy) rating.

ABT shares were trading at $97.84 per share on Tuesday afternoon, down $0.45 (-0.46%). Year-to-date, ABT has declined -29.32%, versus a -18.26% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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