Abbott’s EPS Growth Is 2x Compared To Medtronic’s

by Trefis Team
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Abbott’s (NYSE:ABT) adjusted earnings per share (EPS) grew at a CAGR of 11% from $2.16 in 2015 to $3.26 in 2019. This was almost 2x the CAGR of 5.1% for Medtronic’s (NYSE:MDT) adjusted EPS, which grew from $4.28 in fiscal 2015 to $5.22 in fiscal 2019. This clubbed with Abbott’s lower debt levels explains its higher price to earnings multiple of 25x in comparison to Medtronic’s 20x based on the current market price and average consensus earnings estimate for 2020. In this dashboard, Medtronic vs Abbott: How Have Revenues & Other Key Metrics Changed Over Recent Years?, we have analyzed the revenues and other key metrics of both the companies over recent years.

 

#1 Market Cap: Both Medtronic And Abbott’s Market Cap Is Similar

  • Medtronic’s market capitalization grew from $109 billion in 2015 to $152 billion in 2019.
  • Abbott’s market capitalization grew from $68 billion to $154 billion over the same period.

#2 Revenues: Medtronic’s Revenues of $31 Billion Are Slightly Lower Than $32 Billion For Abbott.

  • Medtronic’s revenue grew from $20.3 billion in fiscal 2015 to $30.6 billion in fiscal 2019. Look at our interactive dashboard analysis for more details on Medtronic’s revenues.
  • Abbott’s revenues grew from $20.4 billion in 2015 to $30.6 billion in 2018. Look at our analysis on Abbott’s revenues for more details.

#2.1 Revenue Growth: Both Medtronic And Abbott’s Revenues Grew At A CAGR of Around 12% Between 2015 And 2019

  • Both Abbott and Boston Scientific saw similar growth in revenues in the recent years. And for both there was some impact of acquisitions in the sales growth.
  • While Abbott’s growth in 2017 was aided by the St Jude acquisition and 2018 growth aided by the Alere acquisition, Medtronic’s growth in 2016 was bolstered by the Covidien acquisition.

#3 US Sales: US Accounts For A Significant Portion of Total Sales For Both The Companies

  • US sales accounted for 53% of Medtronic’s total sales in 2019.
  • For Abbott, the figure stood at 36% in 2019.

#4 Gross Margins: Gross Profit Margin For Medtronic Is Better Than That For Abbott

  • Abbott’s Gross Profit Margin grew from 57.1% in 2015 to 58.5% in 2019.
  • Gross Profit Margin for Medtronic grew from 68.9% in fiscal 2015 to 70.0% in fiscal 2019.

#5 Net Income Margin: Medtronic’s Adjusted Net Income Margin Is Better Than That of Abbott

  • Medtronic’s adjusted net income margin declined from 23.4% in fiscal 2015 to 21.6% in 2016, post the Covidien acquisition. However, it grew thereafter to 23.2% in fiscal 2019.
  • Abbott’s adjusted net income margin grew from 16.0% to 18.2% between 2015 and 2019.
 #6 EPS Growth: Abbott’s EPS Grew 2x Faster Than Medtronic’s
  • Medtronic’s adjusted EPS grew at a CAGR of 5.1% from $4.28 in fiscal 2015 to $5.22 in fiscal 2019.
  • Abbott’s adjusted EPS grew at a CAGR of 10.9% from 2.16 in 2015 to $3.26 in 2019.

#7 Total Debt: Medtronic’s Total Debt Stood Stood At $24.5 Billion In 2019, Compared To $19.4 Billion For Abbott, As Shown In Medtronic vs Abbott Dashboard.

#8 Valuation: Medtronic Trades At 20x 2020 EPS, while Abbott trades at 25x 2020 EPS

  • Medtronic’s current market price of about $113 per share implies that it trades at 20x its projected 2020 average consensus earnings.
  • In comparison, Abbott’s current market price of about $89 implies a P/E multiple of about 25x based on projected 2020 average consensus earnings.
  • Abbott’s higher multiple is due to its strong revenue growth and lower debt load, which likely reduces its risks.
 #8.1 Medtronic Valuation
  • Our price estimate of $115 for Medtronic is based on our Detailed Valuation Model, and implies a 20.5x P/E Multiple on expected fiscal 2020 Adjusted EPS of $5.60.

#8.2 Abbott Valuation

  • Our price estimate of $96 for Abbott is based on our Detailed Valuation Model, and implies a 26.8x P/E Multiple on expected 2020 Adjusted EPS of $3.60.

See all Trefis Price Estimates and Download Trefis Data here

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