Abbott Laboratories (NYSE:ABT) is positioned for continued development in the Diabetes sector in the coming quarters. A strong first-quarter 2023 performance boosts confidence. However, currency issues and lower sales are impeding expansion.

This stock has gained 0.9% over the last year, compared to a 22.7% decrease in the industry and a 13.3% rise in the S&P 500 composite.

This well-known manufacturer of a wide range of healthcare items has a market capitalization of $187.89 billion. The company hopes to sustain its good performance and predicts 5.1% growth over the next five years. Abbott’s earnings have exceeded expectations in each of the previous four quarters, with an average surprise of 19.28%.

Let’s go deeper.

Factors at Work 

Q1 Advantages: Abbott reported higher-than-expected earnings and revenue in the first quarter of 2023. Organic revenue growth excluding COVID testing climbed by 10%, driven by double-digit increases in Medical Devices, Established Pharmaceuticals, and Nutrition. EPD sales climbed 11% in the quarter, driven by strong performance in Brazil, China, and Southeast Asia, as well as in numerous therapeutic areas such as cardiometabolic, gastroenterology, CNS, and pain management. For the past two years, EPD has maintained its double-digit sales growth trend.

Progress in the Diabetes company: In the first quarter of 2023, this company generated organic sales growth of 21%, led by more than 25% increase in FreeStyle Libre, which included roughly 50% growth in the United States and mid-teens growth abroad. FreeStyle Libre sales were $1.2 billion in the third quarter. Libre got FDA approval for integration with automated insulin administration devices during the quarter. Abbott is currently collaborating with prominent insulin pump manufacturers to integrate their systems with the Libre 2 and Libre 3 platforms.

Libre has acquired global leadership in CGM systems for Type 1 and Type 2 users in a relatively short period of time. In 2020, the company received FDA approval for Freestyle Libre 2 (an integrated continuous glucose monitoring (iCGM) system for adults and children), as well as CE Mark for Libre 3 (which integrates Libre’s accuracy and performance into the world’s smallest fitness disposable sensor) and Libre Sense Glucose Sport (which is Abbott’s first step in a very deliberate approach to pursue mass market biosensor opportunities beyond diabetes).

Positive Guidance: Abbott gave earnings per share guidance for 2023.

Adjusted earnings per share for the full year (excluding specific items of $1.25 per share) are estimated to be in the $4.30-$4.50 range. The most recent Zacks Consensus Estimate is $4.36. Abbott anticipates full-year 2023 organic sales growth in the mid single digits, excluding COVID-19 testing-related revenues, and COVID testing-related sales of roughly $1.5 billion.

Downsides Foreign Exchange Translation Has an Impact on Sales: Foreign exchange is a big disadvantage for Abbott because a significant portion of its income comes from outside the United States. The company’s performance in overseas markets has been hampered by the rise of the Euro and other developed market currencies.

Lower Sales: Abbott’s reported first-quarter worldwide sales were down 18.1% year over year. COVID-19 testing-related sales drop impacted total sales. Diagnostics’ expected sales growth was hampered by a considerable drop in COVID testing sales compared to first-quarter 2023 levels.

Trends in Estimates

The Consensus Estimate for Earnings has risen 0.2% in the last 90 days to $4.39.

The Consensus Estimate for the company’s 2023 revenues is $39.38 billion, implying a 9.8% decrease from the previous quarter’s reported figure.

Image: Image by DCStudio on Freepik

Please See Disclaimer