Abbott Labs: What To Look For In Q1 Earnings
Abbott Labs (NYSE:ABT) will report its Q1 2017 earnings on April 19. We believe that some of the key trends observed in the previous quarter are likely to continue. Our primary concern is Abbott’s nutritional segment’s performance in China. There is an oversupply in China’s nutrition market, and the situation is exacerbated by discounts being offered by local players to clear inventory in the wake of the government’s new safety regulations. Additionally, there is likely to be near-term pressure on sales due to the shift to the e-commerce sales channel. To add to this, Abbott recently received a warning letter from the FDA regarding the manufacturing practices of one of the facilities of St. Jude Medical, which it acquired recently. Investors expect significant synergies from the St. Jude acquisition in the next 2-3 years, and the additional costs of addressing the regulatory concerns could cause a minor dent. We also look forward to more color on Abbott’s acquisition of Alere. The company recently sealed the deal for $4.4 billion.
Our price estimate of $46.50 for Abbott Laboratories is slightly above the market.
Despite the aforementioned concerns, there is a lot going well for Abbott. Its point-of-care diagnostics products are growing well, and saw a nearly 8.5% increase in their sales in Q4 2016. This was driven by strong adoption of the i-STAT handheld system in the U.S. and international markets. Abbott has also obtained CE approval for four new major diagnostics systems, which include “Alinity s” for blood and plasma screening, “Alinity i” for immunoassay diagnostics, “Alinity c” for clinical chemistry diagnostics and “i-STAT Alinity” for point of care blood testing. In the diabetes segment, Freestyle Libre is expected to do well. Abbott has also streamlined its established pharma business through sale of its developed markets business and acquisition of CFR Pharmaceuticals and Veropharm. We expect the segment’s operational growth to be strong.
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