Abbott Laboratories (ABT) operates in the Established Pharmaceutical Products; Diagnostic Products; Nutritional Product; and Medical Devices segments. The company became a leading provider of at-home testing during the pandemic and expects to continue developing additional at-home testing solutions.

The company provides market-leading products that align with favorable long-term healthcare trends in developed and developing markets. Moreover, the company’s global presence aids its growth.

ABT’s 70% of revenue is generated in markets outside the United States, and 50% is generated in faster-growing geographies where healthcare spending is outpacing the growth of gross domestic product (GDP).

ABT’s revenues have increased at a CAGR of 13.2% over the past three years and 14.8% over the past five years. Both net income and EPS grew at a CAGR of 43.4% over the past three years, while its EBITDA increased at a 23% CAGR.

The company enjoys substantial sales across its adult and pediatric nutrition range globally. An aging population and high birth rates are increasing the need for quality nutrition. Moreover, its customer-focused innovations across Clinical Chemistry, Immunoassay, Hematology, Blood and Plasma Screening, Molecular Diagnostics, and Point of Care should drive growth.

Furthermore, its Pharmaceuticals and Medical Devices segments are also fast advancing with significant technological advancements and its strong position across some of the world’s fastest-growing economies.

ABT recently has been making headlines related to the baby formula debacle. However, the company noted that there was currently no evidence to suggest a connection between the death and its baby formula and that it would investigate further.

The stock is down 8.7% over the past year and 22.2% year-to-date, closing the last trading session at $109.49.

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

Recent FDA Clearances

Earlier this year, the company announced the U.S. Food and Drug Administration (FDA) clearance for its next-generation FreeStyle Libre 3 system for use by people four years and older6 living with diabetes. The system features the world’s smallest, thinnest, and most accurate 14-day glucose sensor.

Moreover, last month, ABT announced it’s developing a new biowearable that will continuously monitor glucose and ketone levels in one sensor, which secured breakthrough device designation from the U.S. Food and Drug Administration.

“Abbott revolutionized diabetes care with FreeStyle Libre® technology, which is the number one continuous glucose monitor used by 4 million people around the world,” said Jared Watkin, senior vice president of Abbott’s diabetes care business.

In addition, ABT announced the FDA clearance for its Alinity™ m STI Assay. The test simultaneously detects and differentiates four common sexually transmitted infections (STIs). The first-of-its-kind multiplex test is expected to provide a more holistic picture of someone’s health in a single test and should gain popularity, given the rising STI cases in the past several years.

Robust Financials and Growing Dividends

For the fiscal first quarter ended March 2022, ABT’s net sales increased 13.8% year-over-year to $11.90 billion, while organic sales were up 17.5% year-over-year. Global COVID-19 testing-related sales amounted to $3.30 billion in the quarter. Its operating earnings rose 38.1% from the year-ago value to $2.91 billion.

Non-GAAP net earnings came in at $3.08 billion, indicating a 29.9% year-over-year increase. The company’s non-GAAP EPS increased 31.1% from the prior-year quarter to $1.73.

In addition, it has increased its dividend payout for 50 consecutive years and is a member of the S&P 500 Dividend Aristocrats Index.

Impressive Profitability

ABT’s EBIT and EBITDA margins of 22.58% and 30.28% are 1,673.9% and 607.4%, higher than the industry average of 1.27% and 4.28%, respectively. Also, its net income margin of 17.35% is substantially higher than the industry average of negative 1.86%.

Furthermore, its ROE, ROA, and ROTC of 22.32%, 10.44%, and 11.97% compare with the industry averages of negative 35.84%, 27.12%, and 19.70%, respectively.

POWR Ratings Show Promise

ABT has an overall A rating, which translates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

ABT has an A grade for Growth, consistent with its steady rise in financials over the past few years.

The stock has a grade of B for Quality. Its higher-than-industry profit margins justify this grade.

Of the 149 stocks in the Medical – Devices & Equipment industry, ABT is ranked #3.

Beyond what I have stated above, one can also view ABT’s grades for Value, Sentiment, Momentum, and Stability here.

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

Bottom Line

The stock witnessed weak momentum over the past few months due to its baby formula-related bearish sentiments and the broader market sell-off. However, given its innovations in the medical space and its expanding addressable market, the company looks poised to deliver solid returns over the long term.

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

ABT has an overall POWR Rating of A. However, one could also check out these other stocks within the Medical – Devices & Equipment industry with an A (Strong Buy) rating: Olympus Corp. (OCPNY), Fonar Corporation (FONR), and Electromed, Inc. (ELMD).

ABT shares were unchanged in premarket trading Friday. Year-to-date, ABT has declined -21.62%, versus a -17.49% rise in the benchmark S&P 500 index during the same period.

About the Author: Subhasree Kar

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...

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