Abbott Lifts Annual Profit Forecast, Banks on CGM SalesAbbott Lifts Annual Profit Forecast, Banks on CGM Sales
The company showed an overall strong quarter despite disappointing nutrition and diagnostic results.
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Abbott Laboratories has, for the third time in 2024, lifted its annual profit forecast after beating Wall Street estimates for quarterly earnings amid strong demand for its continuous glucose monitors (CGMs), among other devices.
Due to reported Q324 sales of $10.64 billion, beating the consensus of $10.55 billion — and an adjusted diluted earnings per share of $1.21, just beating analyst estimates of $1.20 — Abbott raised the full year EPS guidance to $4.64 to $4.70. The $10.64 billion in sales for the quarter represented a ~5% year-over-year (YoY) growth as its medtech business generated $4.7 billion with ~12% YoY growth, reportedly driven by double-digit growth in the diabetes care and cardiac segments.
For diabetes care, CGMs brought in over $1.6 billion in sales with ~19% YOY growth. Additionally, double-digit sales growth in catheters and cardiac mapping-related products led to an increase of ~12% YoY in electrophysiology sales. The Illinois-based company saw its pharma segment growth of $1.4 billion in sales during Q324, indicating an increase of ~3% YoY.
In August, the company entered into a global partnership with Medtronic to connect the FreeStyle Libre CGM sensor with its automated insulin delivery systems. Then in September, Abbott launched its non-prescription CGM, Lingo, in the US.
CGM sales continued to soar in Q3 despite the Class I recall of its FreeStyle Libre 3 sensors after finding that a small number of sensors had the potential to provide inaccurate high glucose readings, which could cause significant health risks for diabetics if left undetected.
However, the report wasn’t a win across the board. Abbott’s diagnostic division continued to decline, generating $2.4 billion, down ~2% YoY as COVID-19 testing sales plummeted ~13% YoY globally.
Worldwide nutrition sales also decreased by 0.3% compared to Q324, most likely a result of current lawsuits against the company alleging its specialized formula for premature infants caused the development of a bowel disease called necrotizing enterocolitis (NEC). Of note, FDA, CDC, and NIH backed premature infant formula products in a joint statement earlier this month, writing:
“There are two key points about feeding practices and NEC: 1) There is no conclusive evidence that preterm infant formula causes NEC; and 2) there is strong evidence that human milk is protective against NEC,” according to the agencies. “Available evidence supports the hypothesis that it is the absence of human milk – rather than the exposure to formula – that is associated with an increase in the risk of NEC. Further, human milk significantly reduces, but does not eliminate, the risk of NEC, given that NEC is known to occur in infants fed exclusively human milk diets.”
Currently, according to Robert Ford, chairman and CEO of Abbott, the judge in the trial has not allowed the joint statement to be entered as evidence. “Ultimately, the regulator decides if the products are safe, and they're fit for purpose and they decide how they got to be labeled,” he said in the recent earnings call. “And that's the country, that's the market that I want to be in, where the products, the labels, they're evaluated through a well-established regulatory process by expert regulators that have unfettered access to the best scientific evidence rather than trying to do this, regulate products through uncertainty and unpredictive jury trials.”
Despite challenges in some of its units, the company still came out strong in Q324, according to Ford, in the earning call.
Answering a question from BofA Securities Travis Steed, Ford said, “We got multiple business units here. I think, by my count, it's close to 17. We always want all 17 to beat and top your estimates here. The reality is sometimes some of them fall short. And then the question is, is [this] something more long-term? Is it more of a one-time kind of challenge? I'd put [the challenges in nutrition and diagnostics] in the second bucket over here. I think one of the benefits that we do have in having a broad diversified portfolio is that when you do have situations like that, other businesses can overperform and make up for that. I think that's what you saw in this quarter.”
While vague, Ford also highlighted Abbott’s 10% earnings growth and high single-digit growth as an indication of continued positive momentum in 2025.
“Similar to last year, I look at the analyst estimates going into 2025, high single-digit growth, 10% EPS. And like I said last year, that feels like a very reasonable starting point.”
And analysts seem to agree.
Margaret Kaczor Andrew, CFA, for William Blair said in her report that Abbott’s strong pipeline of products will continue to contribute to its growth potential.
“Looking at 2025, we continue to believe Abbott has developed a strong pipeline of products that can contribute to a high-single-digit top-line growth profile that is accelerated compared to pre-COVID levels,” she said. “While management hesitated on providing formal guidance for next year until its fourth-quarter call, it noted high-single-digit sales and 10% earnings growth is ‘reasonable’ (as it did to begin this year). … we continue to believe the setup remains attractive given its valuation disconnect to other similar growing large-cap peers in medtech.”
BTIG’s Marie Thibault echoed the same message, and updated its forecast higher, increasing its PT from $135 to $139, “based on 24.5x our 12-24 month adjusted EPS forecast. This is above the NTM P/E multiple for the large-cap comp group,” she said.
“We believe ABT deserves a premium multiple because of its strong medical device product portfolio and pipeline, expanded diagnostics presence, underlying growth in the base business, efforts to sustain strong EPS growth, and robust cash generation,” she said. “Abbott remains focused on high-growth areas, such as diabetes, structural heart and diagnostics, and the company has built a strong internal R&D pipeline of new products.”
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