Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of healthcare products globally. The company operates through its four broad segments: Established Pharmaceutical Products; Diagnostic Products; Nutritional Products; and Medical Devices.
ABT is currently aiming to recapture some of the market shares of its baby formula business through the restart of manufacturing at its Michigan facility. The plant had shut down earlier this year as ABT had recalled its infant formula products. Earlier this month, the company resumed partial production of certain specialty and metabolic formulas at the Sturgis facility.
Over the past year, ABT’s stock has declined 8.4% to close its last trading session at $110.36. It is down 21.6% year-to-date. However, the stock is up 1% over the past five days and marginally intraday.
Here are the factors that could affect ABT’s performance in the near term:
Solid Financials
For the fiscal second quarter ended June 30, ABT’s net sales increased 10.1% year-over-year to $11.26 billion. Operating earnings rose 70.6% from the prior-year quarter to $2.38 billion. Adjusted net earnings improved 20.2% from the same period the prior year to $2.54 billion, while adjusted EPS came in at $1.43, up 22.2% from the prior-year period.
Broad Profit Margins
ABT’s trailing-12-month EBIT margin and EBITDA margin of 22.96% and 30.37% are 1,579.8% and 580.9% higher than their respective industry averages of 1.37% and 4.46%. Its trailing-12-month net income margin of 18.78% is significantly higher than the industry average of negative 2.56%.
The stock’s trailing-12-month ROE, ROTC, and ROA of 24.64%, 12.42%, and 11.56% compare to their respective industry averages of negative 36.22%, 19.74%, and 27.39%.
Strong Growth Story
ABT’s revenue has grown at a CAGR of 13.8% over the past three years and 14.1% over the past five years. Its EBIT, net income, and EPS have registered growth at CAGRs of 33.4%, 43.5%, and 43.5% over the past three years.
POWR Ratings Reflect Promising Prospects
ABT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
ABT has a Quality grade of B in sync with its wide profitability margins. The stock also has a B grade for Stability, consistent with its five-year monthly beta of 0.74.
In the 146-stock Medical – Devices & Equipment industry, it is ranked #4.
Click here to see the additional POWR Ratings for ABT (Growth, Value, Momentum, and Sentiment).
View all the top stocks in the Medical – Devices & Equipment industry here.
Bottom Line
The resumption of its manufacturing operations in Michigan should benefit the company. Moreover, considering its strong positioning in the industry and impressive growth story, I think the stock might be a solid buy for the long term.
How Does Abbott Laboratories (ABT) Stack Up Against its Peers?
While ABT has an overall POWR Rating of B, one might consider looking at its industry peers, FONAR Corporation (FONR) and Olympus Corporation (OCPNY), which have an overall A (Strong Buy) rating.
ABT shares were trading at $108.75 per share on Friday afternoon, down $1.61 (-1.46%). Year-to-date, ABT has declined -21.80%, versus a -13.11% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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