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Investors Business Daily
Investors Business Daily

Abbott Laboratories Skids As Covid Tests Weigh On Organic Growth

Abbott Laboratories topped Wall Street's fourth-quarter expectations Wednesday, helped by already declining Covid test sales, and ABT stock drooped.

Total diagnostic sales crumbled 29% to nearly $3.31 billion. However, that beat expectations, Edward Jones analyst John Boylan said in a note to clients. Overall sales skidded 6.1% organically, worse than calls for a 5% to 5.8% decline, Evercore ISI analyst Vijay Kumar said in a separate note.

Meanwhile, issues continue to plague Abbott's infant formula production facility in Sturgis, Mich.

"We believe that some investors might be disappointed that much of this quarter's outperformance was due to better-than-expected diagnostic product sales, likely due in part to Covid-19-related sales, and that issues within its nutrition business may linger," Boylan said.

On today's stock market, ABT stock dipped 1.4% and ended the regular session at 111.

ABT Stock: Covid Tests, Formula Weigh On Growth

Overall, Abbott earned $1.03 per share, minus some items, on $10.09 billion in sales. Both metrics beat ABT stock analysts' call for a respective 93 cents and $9.67 billion, according to FactSet. But profit also declined close to 22% and sales toppled 12% on a strict, as-reported basis.

Excluding sales of Covid tests and U.S. infant formula — Abbott's most struggling divisions — sales grew 7.4% organically, the company said in a news release. But that wasn't enough to appease ABT stock investors, who sent shares down for the second day running.

Evercore's Kumar credited the sales beat to Abbott's diagnostics division which included Covid test sales of about $1.1 billion. That was "a step-down sequentially," he said. Sales from Abbott's biggest unit, medical devices, climbed 12.2% on a strict, as-reported basis, to $3.75 billion. But nutrition sales fell 14.4% to $1.82 billion.

Guidance Represents 'A Victory'

For the year, Abbott guided to adjusted earnings of $4.30-$4.50 per share. The midpoint of Abbott's outlook was a penny below ABT stock analyst forecasts. The company also expects sales to climb by a high single-digit percentage, on an organic basis and excluding Covid test sales.

Abbott also calls for $2 billion in total Covid testing sales this year.

Edward Jones' Boylan says the guidance could prove conservative.

"Considering the uncertainties around inflation, supply chains, negative foreign-currency impacts and sluggish China demand largely due to Covid-19 outbreaks, we view the as-expected guidance as a victory," he said.

He added: "Our unchanged long-term view is that Abbott's new products and pipeline and solid management will shine through once Abbott's shorter-term issues, which are beyond its control, start to fade."

ABT stock has a middling Relative Strength Rating of 66. This puts shares close to the top one-third of all stocks in terms of 12-month performance, according to IBD Digital.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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