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Abbott (ABT) Diabetes Arm Growth Robust Amid Macroeconomic Woes

Abbott ABT is gaining from new product launches and strategic acquisitions. However, due to macroeconomic hazards, the business environment continues to be challenging. The stock carries a Zacks Rank #3 (Hold).

Over the past year, Abbott has been outperforming the industry it belongs to. The stock has lost 15.6% compared with the industry’s 38% decline.

Abbott exited the fourth quarter of 2022, with better-than-expected earnings and revenues. In Diagnostics, COVID testing sales were $1.1 billion in the fourth quarter. Excluding COVID testing sales, worldwide diagnostics grew more than 11% in the quarter. Growth in the quarter was led by rapid diagnostics where, excluding COVID-19 tests, sales improved 30% year over year.

During the pandemic, Abbott significantly expanded the install base of ID NOW and opened new testing channels. This expanded footprint, drove strong growth and supported testing needs when flu and other respiratory infections surged late in 2021. During 2022, Abbott successfully continued with the rollout of Alinity, the company’s innovative suite of diagnostic instruments, and expanded test menus across its platforms for immunoassay, clinical chemistry and molecular testing.

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Within EPD, sales increased 8% organically in the fourth quarter led by double-digit growth across several countries, including India, China, Brazil, and Mexico, and broad-based strength across several therapeutic areas.

Abbott Laboratories Price

Abbott Laboratories Price
Abbott Laboratories Price

Abbott Laboratories price | Abbott Laboratories Quote

In Medical Device, sales grew 7.5% globally. In the United States, led by double-digit growth in Electrophysiology, Structural Heart and Diabetes Care.

Within Diabetes Care specifically, fourth-quarter sales of FreeStyle Libre grew more than 40% in the United States. Global Libre sales touched $4.3 billion in 2022.

Abbott currently forecasts total organic sales growth, excluding the impact of COVID testing-related sales, to be in high-single digits in 2023.

In a major update, Abbott recently entered into a definitive agreement to acquire Cardiovascular Systems, a medical device company with an advanced atherectomy system used in treating peripheral and coronary artery disease.

On the flip side, Abbott’s fourth-quarter revenues and earnings declined on a year-over-year basis. Total sales were negatively impacted by COVID testing-related sales decline. COVID testing sales were $1.1 billion in the fourth quarter with rapid testing platforms, including BinaxNOW in the United States, Panbio internationally and ID NOW globally, comprising approximately 95% of the sales.

Moreover, the decline in U.S. infant formula sales due to manufacturing disruptions dented the quarter’s sales further. We note that a manufacturing stoppage was initiated in February 2022 of certain infant nutrition formula products manufactured at Abbott's Sturgis, MI, facility.

Within Medical Device, international sales were negatively impacted by intermittent COVID lockdowns in China, as well as supply constraints in certain areas.

Within Abbott’s Nutrition business, in the fourth quarter, worldwide Nutrition sales were down 5.7% on an organic basis, with an 11.8% slump in Pediatric Nutrition sales. The downside in total worldwide Nutrition and Pediatric Nutrition sales can be attributed to a voluntary recall and manufacturing shutdown of certain infant formula products manufactured at one of Abbott's U.S. plants since last February.

A challenging macro environment, adverse currency translation and stubborn inflationary situation severely impacted the company’s profitability in the fourth quarter.

Key Picks

Some better-ranked stocks in the overall healthcare sector include Haemonetics Corporation HAE, TerrAscend Corp. TRSSF and Akerna Corp. KERN. Haemonetics and TerrAscend both sport a Zacks Rank #1 (Strong Buy), while Akerna carries a Zack Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Haemonetics’ stock has surged 42.1% in the past year. Earnings estimates for Haemonetics have increased from $2.87 per share to 2.91 for 2023 and from $3.02 per share to $3.28 for 2024 in the past 30 days.

HAE’s earnings beat estimates in each of the last four quarters, delivering an average surprise of 10.98%. In the last reported quarter, it reported an earnings surprise of 7.59%.

Estimates for TerrAscend in 2023 have remained constant at a loss of 10 cents per share in the past 30 days. Shares of TerrAscend have declined 70.6% in the past year.

TerrAscend’s earnings beat estimates in one of the last three quarters and missed the mark in the other two, the average negative surprise being 136.11%. In the last reported quarter, TRSSF delivered an earnings surprise of 216.67%.

Akerna’s stock has declined 95.7% in the past year. Its estimates for 2023 have remained constant at a loss of $1.91 per share over the past 30 days.

Akerna missed earnings estimates in each of the last four quarters, delivering a negative earnings surprise of 15.49%, on average. In the last reported quarter, KERN delivered a negative earnings surprise of 13.33%.

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