Can Abbott’s Revenue Continue To Grow In Double-Digits?

We don’t expect Abbott’s (NYSE:ABT) revenue to grow in double-digits in the near term. The company has seen its revenue grow at a CAGR of 12.4% from $20.4 billion in 2015 to $31.9 billion in 2019, but this growth was largely driven by the impact of St Jude Medical as well as Alere acquisitions. Looking forward, the sales will likely grow at a CAGR of 6.7% to $38.8 billion in 2022, led by its Medical Devices business.

Looking at 2020, Abbott’s medical devices business will account for roughly 40% of the company’s total revenue, and it will also grow at a much faster pace compared to the company’s other segments, in our view. Medical Devices is expected to be the single-biggest revenue driver in 2020 with $13.5 billion in revenues (accounting for 39% of the company’s total revenues), which is 1.6x the size of its Diagnostics business, 1.7x the size of Nutritionals business, and 2.9x the size of its Established Pharmaceuticals business. Medical Devices will also be the fastest growing segment, adding $2.9 billion over 2017-2020 (43% of $6.7 billion in incremental revenues). Diagnostics will add $2.6 billion (38% of the $6.7 billion in incremental revenue), Nutritionals will add $0.8 billion (13% of the incremental revenues), and Established Pharmaceuticals will add $0.4 billion, or 6%, of the total incremental revenue.

In this note we discuss Abbott’s revenue, historical trend, forecast, and comparison to peers. You can look at our interactive dashboard analysis on Abbott’s Revenues for more details, parts of which are highlighted below.

Abbott’s Revenue Has Been On A Rise Over The Last Few Years, Led By Acquisitions

• Abbott’s total revenue grew from $20.4 billion in 2015 to $31.9 billion in 2019.
• This growth was largely led by its medical devices and diagnostics businesses, which added over $2.5 billion each in sales during the same period.
• Medical Devices business sales growth in 2017 was aided by St Jude Medical acquisition, while Diagnostics business sales growth in 2018 was aided by the Alere acquisition.
• Looking forward, the revenues could grow at a CAGR of 6.7% to $38.8 billion in 2022, led by steady growth in all business segments.

Comparing Abbott’s Sales Growth To Its Peers

• Abbott’s total revenue grew at a CAGR of 12.4% between 2015 and 2019.
• This compares with 9.5% growth for Boston Scientific, 12.0% for Medtronic, and 17.1% for Intuitive Surgical over the same period.

Abbott’s Medical Devices Business Will Likely Drive The Near Term Growth

• Abbott’s Medical Devices segment sales grew from $5.0 billion in 2015 to $12.3 billion in 2019, led by the St Jude Medical acquisition.
• We estimate it to grow to $16.0 billion in 2022, led by increased adoption of its HeartMate devices, as well as higher sales of electrophysiology, structural heart, and diabetes devices, a trend seen in the recent past.
• The company has seen massive success with its glucose monitoring device, FreeStyle Libre, which is the first of its kind device that does not require pricks to monitor the glucose levels. The company has stated that it has doubled its user base each year to 2 million currently, and it will likely see sales expand in the international markets.

Abbott’s Diagnostics Business Will Likely See Mid-Single-Digit Growth In The Near Term

• Diagnostics segment sales grew from $4.6 billion in 2015 to $7.7 billion in 2019, led by the Alere acquisition, which resulted in 33% jump in revenues in 2018.
• Looking forward, we forecast the sales to grow in mid-single-digits to $9.1 billion in 2022.
• The sales growth will likely be led by point-of-care test equipment, a trend seen in the recent past.
• The company received the US FDA approval of Alinity s system last year, and it is now rolling out the same in new markets. The new Alinity systems help in speed, automation, and efficiency for blood and plasma screening, among other variants.

Abbott’s Nutritionals Business To Grow At A CAGR of 4.7%

• Nutritionals segment sales grew from $7.0 billion in 2015 to $7.4 billion in 2019.
• Looking forward, we forecast the sales to grow at a CAGR of 4.7% to $8.5 billion in 2022.
• We expect the sales growth to come from the company’s new product launches, increased awareness about nutritionals, and continued expansion in the emerging markets.
• Some of the products that are seeing strong growth include PediaSure, PediaLyte, and Ensure.
• However, the company does derive a sizable portion of its sales from China, and the impact of Covid-19 on the Chinese economy could result in a near term slowdown in the company’s Nutritional products sales.

Abbott’s Established Pharmaceuticals Business Should Continue To See Steady Growth

• Established Pharmaceuticals segment sales grew from $3.7 billion in 2015 to $4.5 billion in 2019, led by the company’s increased focus on key emerging markets India, China, Russia, and Brazil.
• Looking forward, we forecast the sales to grow in mid-single-digits to $5.1 billion in 2022.
• The sales growth will likely be led by continued growth in the key emerging markets, as the spend on healthcare is on a rise. For instance, per capita spend on healthcare in China grew 5x from $82 to $398 between 2006 and 2016.

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