Medical device maker Abbott Laboratories delivered better-than-expected quarterly results on Wednesday and raised its profit forecast for the third straight quarter. Shares rose greater than 1%, shaking off an initially muted response. According to data provider LSEG, sales rose 4.9% to $10.64 billion within the three months ended September 30, beating estimates of $10.55 billion. Organic sales, which exclude Covid testing, increased 8.2% in comparison with the identical period last 12 months. It's unclear whether analysts' estimates are comparable. Adjusted earnings per share (EPS) of $1.21 beat LSEG's expectations by a penny and rose 6.14% on an annual basis. ABT YTD Mountain Abbott Labs year-to-date stock performance. Abbott shares extend their outperformance against the market and healthcare peers. The stock opened Wednesday with a gain of just over 10% for the reason that close on July 26 – after the closing bell that day, the corporate was ordered to pay $495 million in damages in a lawsuit over its premature baby formula. which was an enormous problem overhang on the stock since mid-March. This increase comes ahead of the S&P 500, a closely followed healthcare exchange-traded fund, which rose 6.5% and 1.9%, respectively, over the identical period. Conclusion In the third quarter, Abbott Labs showed why we desired to hold on to the stock in light of the litigation that emerged earlier this 12 months and spooked investors. We reiterate our price goal of $130 and a rating of two, meaning we might wait for a decline before adding to our position. At its 2024 low in July, Abbott's market capitalization was $174.1 billion, about $32 billion below where it was in March, before its rival within the premature baby formula market lost a court case and Abbott's own litigation burden got here into the highlight. We fought the stock within the months that followed, arguing that the selling had been overdone, especially on condition that the scientific community supported Abbott's view that the formulas were medically mandatory for premature babies and didn’t cause an intestinal disorder commonly often known as NEC is abbreviated. A trio of U.S. agencies got here out more strongly in favor of using the formulas earlier this month. At the height of Wednesday's session, Abbott had recouped all market capitalization losses since March 14. “Abbott really persevered,” Jim Cramer said Wednesday. “The Abbott neighborhood just has a lot to offer.” Comment The place to begin is Abbott's medical device segment, which saw revenue rise about 12% to a better-than-expected $4.75 billion, as shown within the chart below. On an organic basis, excluding the impact of currency fluctuations and divestitures, medical device sales increased 13.3%. It's nice when an organization's highest-grossing segment is the one with the fastest growth rate – and that's the case with Abbott. FreeStyle Libre, a continuous glucose monitor (CGM) for individuals with diabetes, continued its impressive growth within the quarter, posting organic sales increase of 21%, a slight acceleration from the previous three-month period. While Abbott has benefited from CGM rival Dexcom's troubles, CEO Robert Ford remained optimistic in regards to the market within the short and long run. “This is a mass market opportunity we have,” he said, noting that there are currently about 10 million CGM users worldwide, but there are over 100 million diabetics in developed countries. Abbott and his colleagues are increasingly targeting CGMs at non-diabetics and hope health-conscious people will wish to use biosensors to learn more about their body's response to aspects comparable to food, stress and exercise. Abbott launched its over-the-counter CGM called Lingo within the US in early September, and Ford said the product was “off to a very strong start.” You should purchase a package with one sensor for $49, two for $89, or six for $249. The two-sensor package is the preferred version, he said. The sensors last about two weeks, and Ford said he has been pleasantly surprised by the reorder rates thus far. Abbott has set a goal of $10 billion in CGM sales by 2028, and Lingo represents a “huge opportunity” to attain that goal over time, Ford said. Another highlight: Abbott Labs announced that its board has approved a brand new stock purchase program value $7 billion. Previous approval from 2021 had run out, Ford said. In the third quarter, Abbott repurchased $750 million of stock. Ford said executives believed there was a disconnect between the stock's valuation and the corporate's business fundamentals. In fact, Abbott typically prioritizes investments in its product pipeline over stock buybacks. So the indisputable fact that management has stepped up its buyback program really shows how they feel in regards to the current share price. Abbott's nutrition division — home to brands like Indeed protein powder and PediaSure children's drinks — was a weak spot, because it was within the second quarter. Sales fell about 0.3% 12 months over 12 months to $2.07 billion, in response to FactSet, falling in need of analysts' expectations of $2.17 billion. On an organic basis, sales within the segment increased by 3.4%. Ford said international pediatric business was the largest drag on nutrition this quarter, blaming Abbott's own “commercial execution” earlier within the quarter. The company quickly identified the weakness and took steps to handle it, Ford said, including staffing changes and subsequent inventory adjustments at dealers. Ford said early indications indicate that Abbott has taken the correct corrective actions and that growth on this business and across the segment should improve in the present quarter. In particular, within the lawsuits, Ford once more vigorously defended premature baby formula. He said the statement from the three U.S. health agencies – the Food and Drug Administration, the Centers for Disease Control and Prevention and the National Institutes of Health – “says a lot.” “It was a very strong statement,” Ford said, although he noted that the judge in an ongoing case in Missouri has not yet allowed it to be introduced as evidence within the case. He said he expects the statement and an accompanying NEC and formula report back to be included as evidence for jury consideration in future cases. Abbott's recent stock performance suggests that investors have gotten increasingly comfortable with the chance of litigation, nevertheless it continues to be too early to declare an entire victory. For this reason, we generally hold back from increasing our position. Still, there may be little doubt in regards to the strength of Abbott's underlying fundamentals. As time goes on, that is prone to come increasingly into the highlight. Abbott Laboratories Why we own it: Abbott is a high-quality medical technology company that’s growing rapidly. The stock is grappling with two headwinds: falling Covid test sales and concerns that the introduction of GLP-1 will disrupt its flagship continuous glucose monitor. As Abbott's organic sales growth continues to shine, the market will realize that each concerns are overblown. Competitors: Dexcom and Edwards Lifesciences Weight in Club Portfolio: 2.89% Last Purchase: 5/29/2024 Initiated: January 29, 2024 Forecast Abbott Labs now forecasts adjusted earnings per share within the range of $4.64 to $4.70 dollar, which represents a rise within the mid-one cent from the previous forecast of $4.61 to $4.71. It's the third quarter in a row that Abbott has raised its EPS forecast midway through. The company reiterated its guidance for full-year organic sales growth of 9.5% to 10%. (Jim Cramer's Charitable Trust is long ABT. See a full list of stocks here.) 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Medical device manufacturer Abbott Laboratories reported better-than-expected quarterly results on Wednesday and raised its profit forecast for the third consecutive quarter. Shares rose greater than 1%, shaking off an initially muted response.
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