Will Abbott Stock Rise After Its Q3 Results?

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Trefis
ABT: Abbott Laboratories logo
ABT
Abbott Laboratories

Abbott (NYSE: ABT) is scheduled to report its Q3 2022 results on Wednesday, October 19. We expect the company to likely post revenue and earnings slightly below the street expectations. Supply chain disruptions, forex headwinds, and a decline in Covid-19-related demand will likely weigh on the company’s performance. Although we expect Abbott to post downbeat results in Q3, our forecast indicates that ABT stock has some room for growth from its current levels, as discussed below. Our interactive dashboard analysis of Abbott Earnings Preview has additional details.

(1) Revenues expected to be slightly below the consensus estimates

  • Trefis estimates Abbott’s Q3 2022 revenues to be around $9.6 billion, reflecting a 12% y-o-y decline and slightly below the consensus estimate of $9.7 billion.
  • The revenue growth will likely be impacted by lower demand for Covid-19 testing and forex headwinds.
  • For perspective, Abbott expects total Covid-19-related sales of $6.1 billion for 2022, of which it has already garnered $5.6 billion in the first half of the year, implying only $500 million in expected sales in the second half of the year. This  compares with $7.7 billion in Covid-19-related sales in 2021.
  • The nutritional segment has had a tough start this year, with manufacturing challenges at its Michigan facility impacting the supply and, in turn, sales of baby formula products, weighing on the segment sales in the first half of this year.
  • Earlier this year, Abbott secured the U.S. FDA approval for its Freestyle Libre 3, and this will help it gain market share and aid the diabetes business sales growth.
  • Looking at Q2, the company reported $11.3 billion in sales, up 10% y-o-y, driven by a solid 33% rise in diagnostics sales.
  • Our dashboard on Abbott Revenues offers more details on the company’s segments.
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(2) EPS likely to be marginally below the consensus estimates

  • Abbott’s Q3 2022 adjusted earnings per share (EPS) is expected to be $0.94 per Trefis analysis, just a cent below the consensus estimate of $0.95.
  • Abbott’s adjusted net income of $2.5 billion in Q2 2022 reflected a 20% growth from its $2.1 billion figure in the prior-year quarter. This can be attributed to higher revenues and nearly a 200 bps net margin expansion, partly due to a decline in R&D and SG&A as a percentage of sales.
  • For the full-year 2022, we expect the adjusted EPS to be lower at $5.03, compared to $5.24 in 2021. This can be attributed to an anticipated decline in Covid-19-related sales.

(3) ABT stock has room for growth

  • We estimate Abbott’s Valuation to be around $124 per share, which is about 23% above the current market price of $101.
  • At its current levels, ABT stock is trading at a  forward P/E multiple of 20x based on our EPS estimate of $5.03 for 2022, compared to the last three-year average of 24x, implying that ABT stock is attractive from a valuation point of view.
  • If the company reports upbeat Q3 results and provides an outlook better than the street estimates, the P/E multiple will likely be revised upward, resulting in higher levels for ABT stock.

While ABT stock looks undervalued, it is helpful to see how Abbott’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Cintas vs. Merck.

With inflation rising and the Fed raising interest rates, among other factors, ABT stock has fallen 28% this year. Can it drop more? See how low Abbott stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Oct 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 ABT Return 5% -28% 163%
 S&P 500 Return 1% -24% 61%
 Trefis Multi-Strategy Portfolio 1% -26% 195%

[1] Month-to-date and year-to-date as of 10/11/2022
[2] Cumulative total returns since the end of 2016

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