What To Expect From Abbott’s Q3?

Abbott (NYSE: ABT) will report its Q3 2024 results on Wednesday, Oct 16. We expect the company to post revenue of $10.6 billion and earnings of $1.20 on a per share and adjusted basis, aligning with the street expectations. We expect the company to post a mid-single-digit uptick in revenue, driven by higher FreeStyle Libre sales. Our interactive dashboard analysis of Abbott’s FY 2024Q3 Earnings Preview has more details on the company’s revenues and earnings for the quarter.

Trends To Watch Out For In Q3

Abbott should see steady growth across its segments. While the Nutrition segment should benefit from market share gains for its baby formula products, medical devices will see higher sales from a rise in procedure volume and continued uptick in demand for its diabetes products. Abbott’s FreeStyle Libre will likely continue to see growth in the number of users. Earlier, in June 2024, the U.S. FDA cleared Abbott’s – Libre Rio and Lingo – new over-the-counter glucose monitoring devices. This should also aid the overall diabetes portfolio sales. Abbott recorded COVID-19 testing sales of $305 million in Q3’23 and this figure will be much lower in Q3’24, slightly offsetting the growth from core laboratory diagnostics. We also anticipate a slight rise in the company’s pre-tax margins, bolstering its bottom-line growth. Overall, we expect Abbott to post an in-line Q3.

How Did Abbott Perform In Q2?

Abbott’s revenue of $10.4 billion in Q2 was up 4% y-o-y. The company reported a 10.2% jump in medical device segment sales, nutrition was up 3.5%, and established pharmaceuticals saw a 0.6% rise in revenue. Growth in these segments was partly offset by a 5.3% fall in Diagnostics revenues due to lower demand for COVID-19 testing. Excluding the COVID-19 tests, the Diagnostics sales were up 5.9%. Within medical devices, diabetes sales were up 15.8% led by FreeStyle Libre. Abbott expects its total 2024 revenue to rise 9.5% to 10% on an organic basis. The company saw its adjusted pre-tax income margin expand by 64 bps y-o-y to 22.7% in Q2. This resulted in a 5.6% rise in the bottom line to $1.14 on an adjusted basis.

What It Means For ABT Stock?

We think ABT stock is fairly priced at levels of $116. We estimate Abbott’s Valuation to be $119 per share, close to its current levels. This represents a 25x the company’s expected earnings of $4.68 per share in 2024. The 25x figure aligns with the stock’s average P/E ratio over the last three years. Abbott, in the previous quarter, raised its adjusted earnings per share guidance from $4.55 to $4.70 earlier to $4.61 to $4.71 now.

With an in-line performance expected in Q3, ABT stock may trade sideways next week. However, we would watch out for its pre-tax margins, any revision in earnings estimates, and the demand trends for its diabetes products, which may define the movement in its stock price in the near term.

Looking at ABT stock performance over a slightly longer term, it has been far from consistent and has largely been as volatile as the S&P 500. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is less volatile. And it has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

While ABT stock looks like it is appropriately priced, it is helpful to see how Abbott’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 10/11/2024
[2] Cumulative total returns since the end of 2016

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