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Here's Why You Should Retain Abbott (ABT) Stock For Now

Abbott Laboratories ABT is well-poised for growth in the coming quarters, courtesy of continued growth in Medical Devices, EPD and Nutrition segments. Solid first-quarter 2023 performance buoys optimism. However, forex woes and lower sales impede growth.

In the past year, this Zacks Rank #3 (Hold) stock has gained 3.8% against 25% decline of the industry and a 3.1% rise of the S&P 500 composite.

This renowned provider of a diversified line of healthcare products has a market capitalization of $192.9 billion. The company projects a 5.1% growth for the next five years and expects to maintain its strong performance. Abbott’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 19.28%.

Let’s delve deeper.

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Q1 Upsides: Abbott exited the first quarter of 2023 with better-than-expected earnings and revenues. Organic sales growth, excluding COVID testing increased 10%, led by double-digit growth in Medical Devices, Established Pharmaceuticals and Nutrition. Within EPD, sales increased 11% in the quarter. The upside can be attributed to strong performance in Brazil, China and Southeast Asia and across several therapeutic areas, including cardiometabolic, gastroenterology, CNS and pain management. EPD successfully continued with its double-digit sales growth momentum for the last two years.

Core Diagnostics Grow Strong: Excluding COVID-testing sales, organic sales growth was led by mid to high single-digit growth in Core Lab, Rapid and Point of Care Diagnostics. In Core Lab Diagnostics, growth was led by strong performance in the United States and Europe, which was partially offset by soft market conditions in China early in the year. However, China is showing improved market demand over the last several weeks. Excluding China, Core Laboratory Diagnostics sales increased nearly 8% globally in the first quarter.

Zacks Investment Research
Zacks Investment Research

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Abbott successfully continued with the rollout of Alinity, the company’s innovative suite of diagnostic instruments and expand test menus across its platforms for immunoassay, clinical chemistry and molecular testing

Upbeat Guidance: Abbott expects full-year adjusted earnings (excluding specified items of $1.25 per share) to be in the range of $4.30-$4.50. The current Zacks Consensus Estimate is pegged at $4.36.
Abbott projects 2023 organic sales growth, excluding COVID-19 testing-related sales, of at least high-single digits and COVID testing-related sales of around $1.5 billion.

Downsides

Foreign Exchange Translation Impacts Sales: Foreign exchange is a major headwind for Abbott due to a considerable percentage of its revenues from outside the United States. The strengthening of the Euro and some other developed market currencies have been hampering the company’s performance in the international markets.

Lower Sales: Abbott’s first-quarter worldwide sales were down 18.1% year over year on a reported basis. Total sales were affected by COVID-19 testing-related sales decline. Within Diagnostics, as forecasted, sales growth was negatively impacted by a significant decline in COVID testing sales compared with first quarter of 2022.

Estimate Trend

In the past 90 days, the Zacks Consensus Estimate for its earnings has been constant at $4.38.

The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $39.38 billion, suggesting a 9.8% decline from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Edwards Lifesciences Corporation EW, Intuitive Surgical, Inc. ISRG and Johnson & Johnson JNJ.

Edwards Lifesciences, carrying a Zacks Rank #2 (Buy), reported first-quarter 2023 adjusted earnings per share (EPS) of 62 cents, beating the Zacks Consensus Estimate by 1.6%. Revenues of $1.46 billion outpaced the consensus mark by 4.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Edwards Lifesciences has a long-term estimated growth rate of 6.8%. EW’s earnings surpassed estimates in two of the trailing four quarters, missed the same in one and broke even in the other, the average being 1.2%.

Intuitive Surgical, with a Zacks Rank #2, reported first-quarter 2023 adjusted EPS of $1.23, beating the Zacks Consensus Estimate by 3.4%. Revenues of $1.70 billion outpaced the consensus mark by 6.9%.

Intuitive Surgical has a long-term estimated growth rate of 13%. ISRG’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 1.9%.

Johnson & Johnson reported first-quarter 2023 adjusted earnings of $2.68 per share, beating the Zacks Consensus Estimate by 6.8%. Revenues of $24.75 billion surpassed the Zacks Consensus Estimate by 5%. It currently carries a Zacks Rank #2.

Johnson & Johnson has a long-term estimated growth rate of 5.5%. JNJ’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 3.9%.

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Abbott Laboratories (ABT) : Free Stock Analysis Report

Johnson & Johnson (JNJ) : Free Stock Analysis Report

Intuitive Surgical, Inc. (ISRG) : Free Stock Analysis Report

Edwards Lifesciences Corporation (EW) : Free Stock Analysis Report

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