Expect Abbott To Continue To See Steady Earnings Growth In The Near Term

by Trefis Team
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Abbott Labs (NYSE:ABT) recently posted its Q4 results, which were in line with our estimates. Medical Devices continued to see steady sales growth, led by electrophysiology, and strong FreeStyle Libre sales. Established Pharmaceutical Products revenue were down in mid-single digits, primarily due to unfavorable currency impact. Looking forward, we expect the same trend to continue in 2019, with Medical Devices driving the top line growth. We forecast the overall sales to grow in mid-single digits and earnings to grow in high-single digits for the full year. We have created an interactive dashboard ~ A Quick Snapshot of Abbott’s Q4 Performance And Trefis Estimates For The Full Year 2019. You can adjust various drivers to see the impact on the company’s adjusted earnings. Below we discuss our forecasts.

Expect Revenues To Grow In Mid-Single Digits

We expect Abbott’s Medical Devices’ revenue to grow in high single digits in 2019, led by electrophysiology, structural heart, and diabetes. 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 is currently seeking approval from the U.S. FDA for an expanded indication. If approved, it will further aid the segment sales growth. In diabetes, FreeStyle Libre continues to see strong demand and sales doubled to $1 billion in 2018. The device will likely see strong market share gains in the coming years, given its no-finger prick benefit, ease of use, and monitoring features (Also See – How Much Can Abbott’s Share Price Gain If FreeStyle Libre Garners 30% Share of The Blood Glucose Monitoring Market).

Diagnostics revenues have seen strong growth in 2018, primarily due to the impact of the Alere acquisition. We forecast the segment revenues to grow in mid-single digits in 2019, led by core laboratory growth in the U.S. and international markets. Abbott’s newly launched Alinity systems will also aid the overall sales growth. Nutritionals segment revenues will likely grow in low-single digits, primarily led by expansion of key brands in emerging markets. We forecast Established Pharmaceutical Products revenue to grow in mid to high-single digits in 2019, led by continued expansion in the key emerging markets.

Looking at adjusted earnings margin, we expect a slight uptick in 2019, led by cost synergies from the merger, resulting in earnings of around $3.15 per share, which is at the lower end of the company’s guided range. Our price estimate of $68 for Abbott is based on a forward price to earnings multiple of around 22x. Note that you can modify all the assumptions on the interactive dashboard to arrive at your earnings and price estimate for Abbott.

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