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.

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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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