With a $212.88 billion market capitalization, diversified healthcare products manufacturer Abbott Laboratories (ABT) is an established player in the healthcare space. 

The Abbott Park, Ill.-based company generated $1.3 billion in COVID-19-testing-related sales in the second quarter, ended June 30. Its net income increased 170.9% from the same period last year to $2.98 billion, while its EPS rose 172.1% from the prior-year quarter to $1.66, beating the $1.02 consensus EPS estimate.

Amid a resurgence of COVID-19 cases with the rapid spread of the Delta variant, the demand for testing equipment is expected to rise in the coming quarters. As such, ABT’s diagnostic equipment pertaining to coronavirus-related testing should witness high demand in the near term.

Click here to checkout our Healthcare Sector Report for 2021

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

Impressive Growth Story

ABT’s revenues have increased at a 10.8% CAGR over the past three years. The company’s EBITDA and net income increased at CAGRs of 19.2% and 90.2%, respectively, over this period. Its EPS has increased at a 97% rate per annum over the past three years.

Dividend Stock

ABT is a constituent of the S&P 500 Dividend Aristocrats Index because it has increased its dividend payouts consecutively over the past 49 years. It pays $1.80 as dividends annually, yielding 1.5% at the current share price. The company’s 1.59%  four-year average dividend yield is 33.8% higher than the 1.19% industry average. The company is set to pay its 390th consecutive quarterly dividend, of $0.45, on August 16.

Stable Growth Prospects

Analysts expect ABT’s revenues to increase 6.9% in the current quarter (ending September 2021) and 13.5% in the current year. ABT’s EPS is expected to increase 19.5% in its fiscal year 2021 and at a 12.8% CAGR over the next five years.

Furthermore,  ABT has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters.

Discounted Valuation

In terms of forward Price/Sales, ABT is currently trading at 5.35x, which is 29.1% lower than the 7.55x industry average. In addition, its 33.77 trailing-12-month Price/Earnings multiple is 8.6% lower than the 36.93 industry average.

Also, ABT’s 2.01 and 5.60 respective non-GAAP forward PEG and EV/Sales ratios compare with 2.03 and 6.46 industry averages.

Consensus Rating and Price Target Indicate Potential Upside

Of the 14 Wall Street analysts that rated ABT, 12 rated it Buy, while one rated it Hold and one rated it Sell. The $128.43 12-month median price target indicates a 7.2% potential upside from yesterday’s $119.81 closing price. The price targets range from a low of $120.00 to a high of $136.00.

Favorable POWR Ratings

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

The stock has a B grade  for Growth, Value, and Stability. Its impressive past financial performance and lower-than-industry valuation justify the Growth and Value grades. Moreover, ABT’s relatively low 0.68 beta is in sync with its  Stability grade.

Of the 220 stocks in the Medical – Pharmaceuticals industry, ABT is ranked #10.

In addition to the grades we’ve highlighted, one can view ABT ratings for Momentum, Sentiment, and Quality here.

View the top-rated stocks in the Medical – Pharmaceuticals industry here.

Bottom Line

The potential for  a market correction and decelerating economic growth has caused heightened  volatility in the stock market. The CBOE Volatility Index has gained 18.8% over the past month and 5% over the past five days. This, coupled with the Fed’s continued dovish stance, makes established industry leaders with stable growth projections and dividend payouts history ideal bets. Thus, we think ABT is a solid bet now.

Click here to checkout our Healthcare Sector Report for 2021

ABT shares were trading at $120.85 per share on Wednesday afternoon, up $1.04 (+0.87%). Year-to-date, ABT has gained 11.65%, versus a 18.24% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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