Abbott's 3 huge earnings points you can't miss

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Abbott's 3 huge earnings points you can't miss

  1. 1. 3 Key Points from Abbott Labs’s Q2 Earnings You Need to Know
  2. 2. A Bounce Back Quarter for Abbott • Abbott’s earnings jumped 17.4% en route to topping analyst estimates in Q2 • Sales climbed 1.9% YOY, also beating projections • Abbott’s diagnostics division posted the quarter’s best result, with revenue climbing nearly 5% Source: Abbott Labs Media
  3. 3. Point #1: Emerging Markets Take Center Stage • Emerging markets have become Abbott’s brightest hope for strong future growth • The strong dollar continues to hurt, negatively impacting revenue by 1.1 percentage points • Abbott’s generics business posted strong results from emerging markets despite unit’s overall flat sales • Key Emerging Markets, including BRIC nations and 10 other markets, recorded 9.7% generic drug revenue growth in Q2
  4. 4. The Generics Business’s International Flair • Abbott’s generics business is poised to become an emerging market leader • Company acquired Russian drugmaker Veropharm and Chilean generics company CFR Pharmaceuticals in Q2, boosting long-term presence in Latin America and Russia • A huge opportunity at stake: The Latin American pharmaceutical market is projected to grow by 116% between 2008 and 2021, according to CitigroupSource: Wikimedia Commons
  5. 5. Mylan Makes the Difference • Abbott’s sale of its Developed and Other Markets generics unit to Mylan boosts growth hopes • Developed market generics revenue declined by 4.4% YOY in Q2, weighing down overall growth • Abbott’s $5.3 billion sale of the unit to Mylan will allow the company to concentrate on expanding generic footprint in emerging markets • Company already is the largest drugmaker in fast-growing India • Keeping its Indian leadership is paramount: McKinsey projects 14.5% annual growth in India’s drug market between 2009 and 2020
  6. 6. Point #2: Are Nutritionals Back on Track? • Nutritionals sales made up more than 31% of Abbott’s overall revenue in Q2 • Unit bounced back from a weak Q1 with 1.6% revenue growth • Adult nutritional sales, while not the biggest opportunity, posted a strong 4.4% revenue uptick Source: Wikimedia Commons
  7. 7. What’s Ahead for Nutrition? • Abbott must keep up in Chinese infant nutrition market • August 2013’s supplier recall cost Abbott $40 million in Q2 – down from $75 million in Q1 - as overall international pediatric nutrition revenue declined by 2.2% • Abbott’s investments in China in Q2, including a new nutrition factory, will help – but company needs to close the gap with rivals, particularly China market leader Mead Johnson. • Mead Johnson owns roughly 16% of Chinese market share according to Morningstar analyst estimates, ahead of Abbott’s share of between 10% and 14% • Too much opportunity to ignore: Zenith International projects China to account for 2/3 of global infant nutrition market growth between now and 2018
  8. 8. Point #3: Medical Devices Still Under Pressure • Medical device revenue returned to growth in Q2, but U.S. market still under fire • U.S. device sales slid by 5.4% YOY, continuing an overall 6.1% sales drop through 2014’s first half • Pricing pressure and stiff competition are likely to continue to weigh on Abbott’s business
  9. 9. Finding Heart in Device Sales • The cardiac device market has struggled lately, but Vascular Device sales mounted a turnaround overseas • Vascular device sales account for 55% of Abbott’s overall device revenue • U.S. sales are still under pressure, but international revenue makes up nearly two- thirds of Vascular Device revenue. • If Abbott can continue to push growth overseas, the device business will be poised for better days ahead • Still no luck for stents: Drug-eluting and bioresorbable stent sales fell nearly 5% in quarter. • Keep an eye on Abbott’s Absorb stent: If the Absorb receives FDA approval in the future, Abbott will have a major innovative product edge on rivals
  10. 10. Looking Ahead • Abbott slightly boosted its full-year earnings outlook, with guidance of between $2.19 and $2.26 in per-share earnings in line with Wall Street’s expectations • However, if Abbott can return to growth in international pediatric nutrition sales while retaining strong diagnostics revenue growth, this company could surprise
  11. 11. The simple investing strategy that can transform your financial future Dividend-paying stocks like Abbott Labs simply crush their non-dividend-paying counterparts. Don’t our analyst report on a group of high-yielding stocks that should be in any income investor’s portfolio.

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