Will Abbott Stock Rise After Its Q4 Results?

Abbott (NYSE: ABT) is scheduled to report its Q4 2022 results on Wednesday, January 25. We expect the company to post revenue and earnings slightly above the street expectations. However, supply chain disruptions, forex headwinds, and a decline in Covid-19-related demand will likely weigh on the company’s overall performance. Although we expect Abbott to post upbeat results in Q4, our forecast indicates that ABT stock is appropriately priced, as discussed below. Our interactive dashboard analysis of Abbott Earnings Preview has additional details.

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

• Trefis estimates Abbott’s Q4 2022 revenues to be around $9.7 billion, reflecting a 16% y-o-y decline and slightly above the consensus estimate of $9.6 billion.
• The revenue decline can primarily be attributed to lower demand for Covid-19 testing and forex headwinds.
• For perspective, Abbott expects total Covid-19 related sales of $500 million in Q4, compared to $2.3 billion in the prior-year quarter.
• Looking at Q3, the company reported total revenue of $10.4 billion, down 4.7% y-o-y, due to lower sales for Medical Devices, Nutrition, and Diagnostics businesses.
• Our dashboard on Abbott Revenues offers more details on the company’s segments.

(2) EPS likely to be above the consensus estimates

• Abbott’s Q4 2022 adjusted earnings per share (EPS) is expected to be $0.99 per Trefis analysis, comfortably above the $0.91 consensus estimate.
• Abbott’s adjusted net income of $2.0 billion in Q3 2022 reflected a 19% fall from its $2.5 billion figure in the prior-year quarter. This can be attributed to lower revenues and nearly a 300 bps gross margin contraction due to higher costs.
• For the full-year 2023, we expect the adjusted EPS to be lower at $4.60, compared to $5.24 in 2021 and an estimated $5.30 in 2022. This can be attributed to an anticipated decline in Covid-19-related sales.

(3) ABT stock looks fairly valued

• We estimate Abbott’s Valuation to be around $118 per share, about 3% above the current market price of $114.
• At its current levels, ABT stock is trading at a forward P/E multiple of 25x based on our EPS estimate of $4.60 for 2023, compared to the last three-year average of 24x, implying that ABT stock is fully valued.
• If the company reports upbeat Q4 results and provides a 2023 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 appropriately priced, 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 8% in the last twelve months. 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.

[1] Month-to-date and year-to-date as of 1/24/2023
[2] Cumulative total returns since the end of 2016

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