ABT stock has seen little change, moving around 15% from levels of $100 in early January 2021 to around $115 in mid-October 2024, vs. an increase of about 50% for the S&P 500 over this roughly four-year period.
Overall, the performance of ABT stock with respect to the index has been lackluster. Returns for the stock were 31% in 2021, -21% in 2022, and 2% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that ABT underperformed the S&P in 2022 and 2023.
Abbott's Q3 revenues were up 4.9% y-o-y to $10.6 billion, primarily led by an 11.7% rise in Medical Devices sales and a 2.7% growth in Established Pharmaceuticals, while Diagnostics revenues fell 1.5%, and Nutrition down 0.3%. The adjusted EPS grew 6% to $1.21 in Q3 2024 from $1.14 in Q2 2023.
Given that the healthcare institutions were focused on Covid-19 and other emergency cases, several types of elective surgeries were postponed in 2020, impacting Abbott's medical device sales.
However, the company's Diagnostics business in the U.S. saw a massive 2x sales growth between 2019 and 2022 due to Covid-19 testing. Now that the pandemic is behind us, Abbott has seen a slowdown in demand for the Diagnostics business. On the flip side, with a rise in total procedure volume, the company is seeing increased sales for its medical devices products.
Libre Rio, an OTC device that targets people with type 2 diabetes who do not use insulin, and Lingo, that helps to track glucose, were approved by the U.S. FDA in June 2024.
FDA approved the company's transcatheter aortic valve implantation (TAVI) system, Navitor, to treat people with severe aortic stenosis who are at high or extreme risk for open-heart surgery in 2023.
FreeStyle Libre 3, Abbott's latest continuous glucose monitoring device, secured FDA clearance in May 2022.
Abbott secured the U.S. FDA approval for its Portico with FlexNav transcatheter aortic valve replacement (TAVR) system in Sep 2021. This system is used to treat people with severe aortic stenosis who are at high risk for open-heart surgery.
Abbott, in 2019, secured the U.S. FDA approval for its Proclaim XR neuro-stimulation system, which uses low doses of mild electrical pulses to change pain signals traveling from the spinal cord to the brain. Abbott could see strong sales of the new device, given that 50 million people in the U.S. suffer from chronic pain.
Also, the U.S. FDA approved Abbott's ARCHITECT STAT High Sensitivity Troponin-I blood test, which aims to identify heart attacks hours earlier than previous methods.
The Medical Devices business for Abbott is doing well, primarily led by increased adoption of its HeartMate device. The segment has seen steady growth in the recent past (barring 2020 due to the pandemic), led by higher electrophysiology, structural heart, and Freestyle Libre sales. Electrophysiology growth is being driven by Confirm RxTM Insertable Cardiac Monitor (ICM), while the structural heart is benefiting from Amplatzer (TM) Occluder and higher sales of MitraClip, which the U.S. FDA has approved for the treatment of heart failure in patients with clinically significant secondary mitral regurgitation.
Below are some key drivers of Abbott's value that present opportunities for upside or downside to the current Trefis price estimate:
Established in 1888, Abbott Labs is a diversified healthcare conglomerate with a global presence. The firm operates in four primary segments: Nutritional Products, Diagnostic, Medical Devices, and Established Pharmaceuticals.
The nutritional segment includes pediatric, adult, healthy living, and sports nutrition products such as infant formulas, snack bars, and meal replacement shakes.
The diagnostics segment includes systems and tests for screening for drug abuse, cancer, therapeutic drug monitoring, fertility, physiological diseases, and infectious diseases such as hepatitis and HIV.
The medical devices segment includes minimally invasive devices for heart diseases, strokes, carotid artery diseases, and other severe vascular conditions.
The established pharmaceuticals segment includes a broad line of generic drugs manufactured worldwide and sold outside the U.S.
Today, more than 35% of Abbott's sales come from emerging markets. Abbott's management has reiterated its intention to tap these high-potential emerging markets. In recent years, Abbott has made significant moves to expand its presence and product portfolio in many of the world's most populous and fastest-growing countries.
Abbott is a market leader in several product categories and continues to leverage its brand to launch new products. The number of new products launched annually has increased five-fold since 2008 on the back of the company's investments in R&D (as well as acquisitions). Both clinical trials and patent applications have increased 10-fold during the same period.
Per capita income levels in many emerging markets are rising rapidly, which provides an immense opportunity for growth in these markets. Also, new studies and increased access to information have led to increasing health consciousness in these markets. However, some emerging markets have patent law issues, which could ultimately limit the growth potential.
The average age of the adult population across the developed world is increasing. As the population gets older, the demand for adult nutrition products and diagnostics increases. This should positively impact Abbott's revenue.
