A Snapshot Of Abbott Labs’ Business

by Trefis Team
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Abbott Labs (NYSE:ABT) struggled to generate significant growth in recent years, which in part prompted the company to make two significant acquisitions. While there was some skepticism in the market initially as the acquisitions impacted the company’s leverage and interest coverage, the stock’s momentum in 2017 suggests that investors are valuing the longer term impact of Abbott’s strategy in a positive light. To give investors a quick overview of Abbott’s business, we have created an interactive dashboard using Trefis’ technology that shows how Abbott has performed in recent years, and how is it likely to grow in the next 2 years.

Abbott’s Revenue & EBITDA Composition

The Medical Devices business is Abbott’s largest segment, and accounts for nearly 39% of its revenue and gross profit. This business includes minimally invasive medical devices for heart diseases, stroke, carotid artery disease, and the recently acquired St Jude Medical. The next largest segment, Nutritionals, accounts for 26% of revenue, followed by Diagnostics (19%) and Pharmaceuticals (16%). Abbott has a broad presence in the healthcare market, especially in medical devices and diagnostics businesses, and in addition to the St. Jude deal, it also acquired Alere to strengthen its market position.

Abbott’s Past Revenue & Gross Profit Growth

Between 2012 and 2016, Abbott’s revenue increased from $19 billion to $20.8 billion, growing at a CAGR of just 2.3%. This prompted the company to expand inorganically, with the aforementioned acquisitions of Alere and St Jude Medical which led to a sharp jump in revenue and gross profit in 2017. With these acquisitions, the company gained access to the fast growing rapid and point-of-care diagnostics market, as well as significantly improving its presence in the cardiovascular market. You can see segment-wise details of its revenue and EBITDA growth on our dashboard.

Abbott’s Future Revenue & Gross Profit Growth

We expect Abbott’s annual revenue to increase from $27.4 billion in 2017 to over $31 billion by 2019, implying a CAGR of 6.7%. This is significantly higher than the growth that Abbott saw between 2012 and 2016, before the acquisitions. This can partially be attributed to the fact that the year 2018 will reflect the full impact of these acquisitions. In addition, we expect Abbott’s organic growth to improve as the company adjusts to new regulations in China, and leverages its stronger market position that it gained with the addition of St Jude Medical and Alere.  To see details of segment revenue and EBITDA growth, see our dashboard.

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