Company Reports

Abbott posted solid first-quarter results that were largely in line with our expectations for the full year, and we’re leaving our fair value estimate unchanged. Revenue grew 5% in constant currency versus the prior-year period. As seen in earlier quarters, falling demand for covid diagnostics dragged on growth, with first-quarter diagnostics revenue down 16%. Importantly, the firm’s consolidated base business more than offset the covid softness by growing 11% year over year. We remain confident that the string of new products and pipeline programs will continue to support Abbott’s narrow economic moat.

While the pandemic caused some of Abbott's segments to balloon (diagnostics) and others to fall short (medical devices), conditions have largely normalized and Abbott's prospects will again rely heavily on its ability to consistently introduce innovative products. On margins, the company has made progress over the last 10 years but still lags key rivals on profitability measures despite competing in businesses that are characterized by attractive margins.

Abbott finished the year with a reported revenue decline of 8% and nearly hit our full-year top- and bottom-line estimates on the nose. We’re holding steady on our $104 fair value estimate as our minor adjustments for 2024 have not shifted our valuation materially. Excluding COVID-19 tests, Abbott saw strong fourth-quarter results with 11% organic growth year over year, excluding COVID-19 tests. However, the market appears underwhelmed by management’s outlook for 2024, especially considering the strength Abbott has displayed in its non-COVID-19 growth during 2023. In particular, the ease with which the firm has regained pediatric formula share lost in the U.S. due to the plant shutdown and progress the Libre franchise has made in penetrating the different segments of the diabetes market underscore the intangible assets that we think support Abbott’s narrow economic moat.

While the pandemic caused some of Abbott's segments to balloon (diagnostics) and others to fall short (medical devices), conditions have largely normalized and Abbott's prospects will again rely heavily on its ability to consistently introduce innovative products. On margins, the company has made progress over the last 10 years but still lags key rivals on profitability measures despite competing in businesses that are characterized by attractive margins.

Narrow-moat Abbott posted solid third-quarter results with underlying strength in its device business along with robust recovery in nutrition, which partially offset the ongoing unwinding of its COVID-19 boom. After minor adjustments to our expectations, we’re leaving our $104 fair value estimate unchanged. On the whole, Abbott’s nonpandemic businesses have benefited from solid underlying demand, though this wasn’t quite enough to completely offset the decline in COVID-19 diagnostics. Rapid and molecular diagnostics, the two product lines that benefited most from COVID-19, saw quarterly year-over-year declines of 59% and 28%, respectively. However, we anticipate the brunt of this decrease is in the rearview mirror and growth should stabilize.

Abbott’s second-quarter results were impressive and built upon strength seen in the previous quarter, with pandemic-related diagnostics falling slightly more than we'd expected but offset by stronger-than-expected growth in medical devices. The firm remains largely on track to meet our full-year top- and bottom-line expectations, and we're leaving our $104 fair value estimate unchanged. Abbott's recent new product cycles and product approvals underscore our confidence in its narrow economic moat. Meaningful innovation in cardiac rhythm management, continuous glucose monitors, and structural heart have reinforced Abbott's intangible assets.

Abbott's first-quarter results demonstrated underlying strength even as the diagnostics segment saw significant declines on diminishing demand for COVID-19 tests. As these dynamics were already reflected in our full-year projections, we're holding steady on our $104 fair value estimate. Total quarterly revenue fell 15% in constant currency year over year, with lower diagnostic sales partially offset by growth in the remaining segments. We anticipate the brunt of the diagnostic declines will affect the first half of 2023, followed by moderation in the second half. However, this diagnostics rollercoaster has not had any impact on Abbott's narrow moat, which remains rooted in intangible assets and switching costs.

Narrow-moat Abbott reported full-year results that modestly outpaced our expectations on the top line, but this was offset by slightly lower profitability than we’d estimated. This was a wash on our valuation and we’re leaving our fair value estimate unchanged. Based on fourth-quarter performance, Abbott remains in the midst of steering through the decline in demand for pandemic-related diagnostics and the early stages of recovering from the U.S. infant formula recall. Fortunately, the firm is well-armed with a range of new devices that should provide some ballast.

Since 2013, Abbott has continued to improve the profitability of its four segments: nutritionals, devices, diagnostics, and established pharmaceuticals. Although the company has made progress over the last 10 years, it still lags key rivals on profitability measures despite competing in businesses that are characterized by attractive margins.

Narrow-moat Abbott posted third-quarter results that generally put the firm on track to meet our full-year projections. At first blush, we may adjust our revenue estimate for 2022 upward to reflect milder declines in COVID-19 antigen tests than we’d originally anticipated, but this wouldn't be substantial enough to shift our fair value estimate of $104. Quarterly revenue rose 1% in constant currency year over year, with international markets consistently outperforming the U.S. across the different divisions, though unfavorable currency translation muted those gains.

Abbott reported second-quarter results that ran slightly ahead of our expectations on the top and bottom lines, but we’re holding steady on our fair value estimate after making slight adjustments in our assumptions that were generally a wash. Despite strong foreign exchange headwinds and partial hobbling of its Sturgis plant where most domestic infant formula is made, Abbott still delivered 10% reported quarterly revenue growth, fueled mainly by strong sales of its COVID-19 antigen tests. We remain comfortable with the firm’s narrow economic moat and see recent regulatory approval of the Aveir leadless pacemaker and the Libre 3 as evidence of the firm’s intangible assets.

Abbott posted impressive first-quarter results that were buoyed by demand for COVID-19 diagnostic tests during the omicron surge, but we’re leaving our fair value estimate unchanged as we expect demand for pandemic-related tests should wind down through the rest of this year. Fortunately, other parts of Abbott that haven’t been boosted by the pandemic are displaying signs of resumption, and we anticipate they will gain strength in 2022. We remain confident in Abbott’s narrow economic moat and view the recent U.S. regulatory approval of Aveir—Abbott’s entry into the leadless pacemaker market—as support for the firm’s likelihood of earning economic profits over the next 10 years.

Abbott delivered robust fourth-quarter and full-year results that largely met our expectations, and we’re leaving our fair value estimate unchanged for now. While the diagnostic segment exceeded our full-year estimates by roughly $900 million thanks to the fourth-quarter omicron surge, this outperformance was generally offset by lower-than-expected sales growth in the nutrition, medical device, and established pharmaceuticals divisions. This back and forth between pandemic-driven diagnostics and Abbott’s other businesses that should return to growth as COVID-19 recedes has been the story for this firm over the last two years, and the dynamic is likely to run through 2022, too. Despite this seesawing, we see little to change our thinking on Abbott’s narrow economic moat. The firm continues to work on innovation, improve operational efficiency, and invest in the salesforce and marketing efforts, all of which shore up its intangible assets.

Since 2013, Abbott has continued to improve the profitability of its four segments: nutritionals, devices, diagnostics, and established pharmaceuticals. Although the company has made progress over the last nine years, it still lags key rivals on profitability measures despite competing in businesses that are characterized by attractive margins.

Since 2013, Abbott has continued to improve the profitability of its segments: nutritionals, devices, diagnostics, and established pharmaceuticals. Although the company has made progress over the last eight years, it still lags key rivals on profitability measures despite competing in businesses that are characterized by attractive margins.

Abbott benefited on two fronts in the third quarter--by increased demand for COVID-19 diagnostics as the delta variant spread and the recovery in non-pandemic demand for nutritional products and medical devices that didn’t seem to be hindered by the increased viral transmission during the quarter. We’ve raised our fair value estimate moderately to $104 per share to reflect this outperformance. We have also adjusted our projections to reflect our expectations for ongoing COVID-19 diagnostic demand that stabilizes at a higher level in 2022 than we’d thought earlier. Aside from the robust growth seen in rapid diagnostics, we were also pleased to see solid mid-single-digit quarterly growth in cardiac rhythm management and electrophysiology versus the normal third quarter in 2019. Abbott’s narrow moat looks solid to us, especially considering the lineup of new products in the works.

While Abbott just received Food and Drug Administration approval on its Portico transcatheter aortic valve replacement device, we continue to hold tempered expectations for the product and are leaving our fair value estimate unchanged. As the fourth entrant to the lucrative U.S. TAVR market, where Edwards Lifesciences and Medtronic dominate the category, narrow-moat Abbott faces a steep uphill battle to carve out a space for itself. Boston Scientific, which was the third entrant more than two years ago, had abruptly exited the U.S. market after it failed to resolve manufacturing issues with the Lotus delivery system. Based on the solid clinical data on Lotus and the device’s distinctive repositioning feature, we thought Boston had a credible chance of penetrating the existing duopoly (though we failed to appreciate the difficulty of scaling up manufacturing). In contrast, Abbott’s Portico offers little over the Edwards Sapien and Medtronic CoreValve franchises. Instead, Portico's record on post-implant paravalvular leakage is significantly worse.

On the whole, narrow-moat Abbott delivered strong second-quarter results against a weak prior-year period, and the minor adjustments we’ve made in our projections were not material enough to shift our fair value estimate. When peeking under the hood, there was a mix of dynamics related to the pandemic that exerted both positive and negative effects on Abbott’s range of businesses. Quarterly revenue rose 35% on an organic basis year over year. However, gross margin fell in the second quarter. Based on management’s comments about friction points in the supply chain, we anticipate this could put pressure on profitability through the near term.

We’re not surprised by narrow-moat Abbott’s recalibration of its outlook for COVID-19 testing now that the pandemic has been receding in developed markets. After fine-tuning our already more tempered estimates for Abbott’s COVID-19 business in 2021 and incorporating our expectations for the U.S. corporate tax rate to rise to a probability-weighted 26%, we’re holding steady on our $97 fair value estimate, as the two factors weren’t enough to materially move our valuation.

Narrow-moat Abbott posted first-quarter performance that showcased a mix of the favorable resumption of cardiac-related procedure volume as well as potential slowing of pandemic-related diagnostic growth. Following slight adjustments to our assumptions that failed to materially shift our valuation, we’re holding steady on our fair value estimate. We continue to view shares as overvalued. While we’re comfortable that Abbott should generally see robust growth in its medical device portfolio through this year, the softening of COVID-19 diagnostic testing remains the wild card, from our perspective. Both aspects of Abbott’s business will hinge heavily on how quickly the pandemic recedes. Considering how quickly vaccination has been going in the U.S., we anticipate stronger rebound in U.S. devices for the full year, and more muted results from Europe and Japan.