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Why A Quarterly Beat, Guidance Boost Didn’t Stoke Abbott Stock

Abbott Laboratories (ABT) enjoyed a third-quarter beat, partly due to its Covid testing division. But those sales are expected to peter out, and so ABT stock slumped.


Through the end of the third quarter, Abbott Labs amassed $7.3 billion in sales of its Covid tests. As a result, third-quarter sales declined less than Wall Street expected. But the fourth quarter is expected to add just $500 million in Covid testing revenue.

Evercore ISI analyst Vijay Kumar noted the third-quarter beat comes on the back of diagnostics and established pharmaceuticals sales. Meanwhile, Abbott’s raised full-year earnings outlook implies a lower-than-expected earnings outlook for the fourth quarter, he said.

“We suspect (this) is due to lower Covid testing assumption,” he said in a report to clients.

In premarket trades on today’s stock market, ABT stock toppled 3.5% and was trading near 101.30.

ABT Stock: Organic Sales Results Mixed

During the third quarter, Abbott earned $1.15 per share, minus some items, on $10.41 billion in sales. Earnings toppled close to 18% year over year, but topped forecasts for 94 cents, according to FactSet. Sales also declined nearly 5% on a strict, as-reported basis, but were above the $9.65 billion estimate.

On an organic basis, sales inched 1.3% higher.

Abbott’s biggest segment is its diagnostics division. Sales fell a fraction organically to $3.67 billion. Covid tests accounted for about $1.7 billion of that business. Excluding the Covid contribution, sales rose 3.2% organically, ABT stock analyst Kumar said.

Behind that, medical devices is Abbott’s second biggest business. Sales climbed 6.4% organically to almost $3.62 billion. Excluding one-time issues, revenue from Abbott’s body-worn glucose monitor, Freestyle Libre, grew roughly 24%, he said.

Revenue from established pharmaceuticals — which sell outside the U.S. — advanced 12.2%. But the company’s nutrition segment continued to struggle, falling 10.3% organically. Abbott makes infant formula. In February, Abbott stopped making those products at a U.S. facility. Production restarted in the third quarter.

Earnings Guidance Boost

Abbott raised its adjusted earnings guidance to $5.17-$5.23 per share for the year. ABT stock analysts forecast adjusted earnings of $5.06 per share and $42.49 billion in total sales. The company didn’t offer a full-year revenue outlook.

Kumar kept his outperform rating and 114 price target on Abbott shares.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.


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