What You Need To Know Ahead Of Abbott's Earnigns

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Abbott Labs (NYSE: ABT) is a staple in dividend investors portfolios thanks to a notable track record of dividend increases. The company continues to evolve following the spin-out of AbbVie, including the sale of slow growing generics to Mylan. However, Abbott is facing challenges and second quarter earnings may give investors insight into whether headwinds tied to Abbott's Similac recall last year are abating. In the following slideshow, you'll learn more about Abbott and key considerations to keep in mind when the company reports its second quarter earnings on July 16th.

Transcript of What You Need To Know Ahead Of Abbott's Earnigns

  • What You Need To Know Ahead of Abbotts Earnings
  • Abbott Labs Driving Abbotts success: Adult nutrition sales. Diagnostic products. Future growth opportunity: Emerging markets.
  • Driving Abbotts revenue First, lets consider Abbotts revenue sources. Abbott operates 4 segments: 1. Established pharmaceutical (generics). $1.1 billion in Q1 sales. 2. Nutritional products (pediatric & adult). $1.6 billion in Q1 revenue. 3. Diagnostic products (systems & testing). $1.1 billion in Q1 sales. 4. Vascular devices/products (stents & other products). $1.3 billion in Q1 revenue.
  • Driving Abbotts revenue 1. Established pharmaceutical. 1. Ex-currency year-over-year sales down 0.7% 2. Including currency, YoY sales down 6.6%. 2. Nutritional products (pediatric & adult). Ex-currency YoY sales down 1.7%. Including currency, YoY sales down 4%. Headwinds from 2013 recall remain, but should lessen. Pediatric sales fell 8% in Q1. Adult sales up 5.2%, ex-currency.
  • Driving Abbotts revenue 1. Diagnostic products (systems & testing). Ex-currency YoY sales up 5.1%. Including currency, YoY sales up 2.6%. Core lab products used for immunoassays up 11% YoY in U.S. 2. Vascular devices/products (stents & other products). Ex-currency YoY sales up 0.3%. Including currency, YoY sales down 1.2%.
  • Earnings outlook Abbott has beat analyst earnings forecasts in all four of the past four quarters, including by 13.9% in Q1. Estimates for this quarter are unchanged over the past 90 days at $0.51; however, analysts have reduced full year estimates by a penny to $2.19. Revisions will be coming following its deal with Mylan. Abbott retains its emerging market generic business. A new entity that includes Abbotts developed country business will be formed.
  • Earnings outlook Analysts expect long-term earnings growth will lift EPS to $3.08 in 2017. Following the Mylan deal, Abbott expects a 2% benefit to net income growth; however, off a lower base. Deal reduces Abbotts 2015 EPS by an estimated $0.22.
  • Fool-worthy thoughts Nutrition headwinds should ease over time. Adult nutrition demand should increase alongside demographics. Diagnostic demand should climb due to aging boomers and ACA enrollment. Device demand will remain challenging/highly competitive. Opportunity for growth in ophthalmology. Deal with Mylan removes slow growth developed market business. Impact on EPS early, but faster growth rates thereafter. Emerging market generic business offers faster growth as those economies strengthen.
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