What To Expect From Abbott’s Full-Year 2019 Earnings

by Trefis Team
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Abbott (NYSE:ABT) will release its Q4 and full-year 2019 results on Wednesday, January 22. For full-year 2019, Trefis estimates that the company will report:

  • Revenues of $31.8 billion, reflecting 4.1% y-o-y growth, primarily driven by the company’s medical devices segment. Our revenue forecast is slightly lower than the consensus estimate of $31.9 billion.
  • EPS figure will likely improve to $3.24 on an adjusted basis, primarily due to slower growth in expenses and a reduction in share count compared to the previous year. Our EPS figure forecast is in line with the consensus estimate of $3.24.

We believe that in-line earnings for FY 2019 could result in a slight positive movement in Abbott’s stock price after the company’s earnings announcement. Our forecast indicates that Abbott’s valuation is $91 a share, which is slightly higher than the current price of around $89. Look at our interactive dashboard analysis for Abbott’s FY19 Earnings for more details.

(1) Revenues Expected To Be Slightly Below The Consensus Estimates

  • Trefis estimates Abbott’s 2019 revenues to be $31.8 billion, slightly below the consensus estimate of $31.9 billion.

(1) Medical Devices               $12.2 Bil (38%)
(2) Diagnostics                       $7.7 Bil (24%)
(3) Nutritional                         $7.4 Bil (23%)
(4) Established Pharma         $4.5 Bil (14%)
————————————————–
TOTAL                                      $31.8 Bil
Consensus                                $31.9 Bil
Surprise                                    $(0.1) Bil

  • Total revenues have increased at an average annual rate of 21.5% from $20.9 billion in 2016 to $31.8 billion in 2018, primarily driven by acquisitions.
  • However, it is expected to see only a 4% growth in 2019 – primarily driven by the company’s Medical Devices business.
  • Note that 2017 and 2018 revenue growth was driven by St Jude and Alere acquisitions, respectively.
  • Abbott’s revenue will likely grow in mid-single-digits on average over 2019-2020, led by steady growth across its segments, primarily from emerging markets, which has been the key focus of the company of late.
  • Our separate interactive dashboard analysis about Abbott Labs’ Revenues provides an in-depth view of the company’s revenues along with our forecasts.

2) Adjusted EPS Expected To Increase 11.8% From $2.90 In 2018 To $3.24 In 2019

  • Abbott’s 2019 adjusted earnings per share (EPS) expected to be $3.24 per Trefis analysis, in line with the consensus estimate of $3.24 per share.

Total Revenues                     $31.8 Bil
– Total Expenses                   $26.1 Bil
——————————————–
Net Income                           $5.7 Bil
÷ Shares Outstanding          1.8 Bil
——————————————–
EPS                                         $3.24
Consensus                              $3.24
Surprise                                  $0.00

  • An increase in revenues and a slower growth in expenses will drive EPS growth.
  • As we forecast Abbott’s revenues to grow at a faster rate than its expenses in 2019 (4.1% vs. 2.6%), this will result in a 120 bps increase in the company’s adjusted net income margin figure from 16.8% in 2018 to 18.0% in 2019, as detailed in the dashboard.
  • For 2020, we believe that revenue will grow at a faster pace when compared to expenses, resulting in the net income margin figure to increase to 18.7%.
  • We capture trends in Abbott Labs’ Expenses over the years in detail in an interactive dashboard.

(3) Stock Price Estimate Is Slightly Higher Than Market Price

  • Trefis’ forecast for Abbott’s 2019 earnings is in line with the market expectations but for P/E multiple is slightly higher than the consensus, working out to a fair value of $91 for Abbott’s stock, which is roughly 2% higher than the current market price of around $89.
  • A Trailing P/E Multiple of 28.1x Looks Appropriate For Abbott’s Stock, Which Is Slightly Higher Than The Current Implied P/E Multiple of 27.3x
  • We use our full cash flow model for Abbott to arrive at a P/E multiple of 28.1x for a price estimate of $91
  • Note: P/E Multiples are based on Share Price at the end of the year, and reported (or expected) Adjusted Earnings for the full year.

See all Trefis Price Estimates and Download Trefis Data here

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