ABT Stock: Abbott Shakes Off Covid Declines To Beat Expectations

Abbott Laboratories (ABT) defied its declining Covid business in the first quarter, beating expectations on the back of a rock-star medical devices segment. In response, ABT stock surged.

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“The medical devices division was the star of the show, growing better than our cautiously optimistic expectations,” Edward Jones analyst John Boylan said in a report to clients. “Sales were stronger than expected in heart valve, heart failure and neuromodulation products, thanks largely to product innovation.”

In morning action on today’s stock market, ABT stock soared 6.8%, trading near 111.20 at its highest point since early February.

Abbott shares recently retook their 50-day moving average, MarketSmith.com shows. The earnings release sent shares above their 200-day line for the first time in two months.

ABT Stock: Organic Growth Drove The Show

During the March quarter, adjusted earnings declined 40.5% to $1.03 per share but beat expectations for 99 cents, according to FactSet. Sales fell 18.1% on a strict, as-reported basis to $9.75 billion. But the Street had projected a lower $9.67 billion.

However, organic sales growth remained strong. Excluding the impact of exchange rates, exiting the pediatric nutrition business in China and declining Covid test sales, Abbott’s sales grew 10% organically.

“We thought the 10% organic (growth) was above expectations and driven by strength in medtech, established pharmaceuticals and nutrition, which was partially offset by lower diagnostics,” Evercore ISI analyst Vijay Kumar said in his note to clients.

He kept his outperform rating and 108 price target on ABT stock.

On an organic basis, medical devices sales grew 12.4%, leading 11.1% and 10.3% growth for established pharmaceuticals and nutrition, respectively. Abbott’s established pharmaceuticals only sell outside the U.S. Diagnostic sales, excluding Covid tests, grew 4.4% organically.

Covid test sales tumbled almost 78% to $730 million.

Structural Heart, Diabetes Key

Evercore’s Kumar noted strength from Abbott’s structural health business.

Sales from MitraClip, a device used to stop leaking in the heart’s mitral valve, grew 10%. Revenue from transcatheter aortic heart-valve replacements soared 64%. TAVR is a method of replacing a faulty heart valve without resorting to open-heart surgery.

In diabetes, sales of Abbott’s body-worn glucose monitor — dubbed FreeStyle Libre — hit $1.2 billion. That included 50% growth in the U.S. Kumar notes that there are now more than 4.8 million Libre users.

Nutrition sales have been a sore spot for ABT stock in recent quarters. Last fall, Abbott recalled some of its infant formula. Following that, the company noted manufacturing concerns that slowed production. But in the first quarter, pediatric nutrition sales climbed 18.4% organically. In the U.S., sales grew 36.1%.

“We thought the pediatric recovery came in above expectations and was a bit faster,” Kumar said.

This year, Abbott expects earnings of $4.30-$4.50 per share and organic sales growth in a high-single-digit range, excluding its Covid tests. Abbott calls for $1.5 billion from its Covid testing business. ABT stock analysts predicted adjusted profit of $4.39 per share and $39.86 billion in sales.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.

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