What To Watch For In Abbott Labs’ Q4 Earnings

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Abbott Labs (NYSE:ABT) is set to report its Q4 2018 earnings on January 23, and we expect the company to post steady growth, primarily led by its Cardiovascular & Neuromodulation, as well as Diagnostics segments. While the Diagnostics business will likely benefit from market share gains in core laboratory, the Medical Devices business should see continued growth in electrophysiology and structural heart. We forecast a mid-single digit revenue growth for the company and earnings to be over $0.80 per share in Q4. Note that exchange rates could have a low single digit negative impact on the company’s revenues. We have created an interactive dashboard ~ What Is The Q4 Outlook For Abbott ~ on the company’s expected performance in the quarter. You can adjust various drivers to see the impact on the company’s adjusted earnings.

Expect Revenues To Grow In Mid-Single Digits

We expect Abbott’s Established Pharmaceutical Products revenue to grow in low single digits in Q4. Note that the prior year’s quarter saw segment revenue growth in high teens led by strong sales in the company’s non-core other business segment. The segment continues to benefit from its expansion in the emerging markets, primarily India, Russia, Brazil, and China. Nutritionals segment revenues will likely grow in low to mid-single digits led by strong growth for Ensure and Glucerna brands in the emerging markets, which will likely be offset by a slow growth in the developed markets. Diagnostics revenues have seen strong growth in 2018, primarily due to the impact of the Alere acquisition, which was closed in Q4 2017. The Rapid Diagnostics business is expected to generate sales of $500 million in Q4. We forecast low single digit growth for the overall segment revenues in Q4 2018, led by Core Laboratory growth in the U.S. and international markets. Looking at Cardiovascular & Neuromodulation, revenues will likely see a mid-to-high single digit growth, primarily led by electrophysiology, and structural heart, both of which are seeing strong growth of late. Electrophysiology growth will likely be led by Confirm RxTM Insertable Cardiac Monitor (ICM), while Structural Heart should continue to benefit from Amplatzer (TM) Occluder and higher sales of MitraClip.

The company’s adjusted net income margin has averaged under 17% over the past four quarters. However, we forecast the margins to improve to 18% in Q4, led by continued cost reductions,  and merger synergies, among other factors. This will translate into adjusted earnings of $0.81 per share in Q4, or $2.90 for the full year. Our price estimate of $67 for Abbott is based on a 23x price to earnings multiple, and is slightly below the current market price of $70. We will update our model and forward earnings estimates post Q4 results.

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