Abbott Laboratories (NYSE:ABT) exhibits strong potential for growth in the upcoming quarters, driven by its global expansion efforts to meet the increasing demand for advanced medical technologies. Despite facing challenges such as foreign exchange fluctuations and a decline in COVID-related sales, the heightened 2023 outlook instills confidence in the company’s trajectory.
Over the past year, ABT stock experienced a modest decline of 2.4%, contrasting with the industry’s 3.1% drop and the S&P 500 composite’s 15.5% rise. With a market capitalization of $178.59 billion, Abbott projects a solid 9% growth over the next five years, emphasizing its commitment to maintaining robust performance. The company consistently exceeded earnings estimates in the last four quarters, with an average surprise of 6.76%.
Factors at Play
Strong Prospects Within Core Diagnostics
Abbott is strategically expanding its Diagnostics business, constituting 24% of the company’s total revenues in Q3 2023. Despite a decline in demand for COVID-19 rapid diagnostic tests, the company offsets this with higher growth in other sectors, particularly in routine diagnostics in the United States and internationally. Abbott continues to roll out Alinity, its fully integrated and automated molecular diagnostics analyzer, expanding test menus across platforms for immunoassay, clinical chemistry, and molecular testing.
Libre Drives Diabetes Care
Abbott’s Diabetes Care business continues to benefit from the success of FreeStyle Libre, its sensor-based continuous glucose monitoring system. FreeStyle Libre achieved global leadership in constant glucose monitoring for both Type 1 and Type 2 users. Notably, the system received FDA clearance for the Freestyle Libre 3 in 2022, and in 2023, it became the first and only CGM system to be nationally reimbursed in France. With FDA clearance for connectivity with automated insulin delivery systems, Abbott is collaborating with leading insulin pump manufacturers to integrate their systems with Libre 2 and Libre 3.
Upbeat Guidance
Abbott provides an optimistic full-year adjusted earnings outlook in the range of $4.42-$4.46, reflecting an increase from the previous guidance of $4.30-$4.40. The company projects low double-digit organic sales growth for 2023, excluding COVID-19 testing-related sales, and anticipates COVID-19 testing-related sales of around $1.5 billion.
Downsides
Foreign Exchange Challenges
Foreign exchange remains a significant headwind for Abbott, given a considerable percentage of its revenues are generated outside the United States. The strengthening of the euro and other developed market currencies had a 1.4% unfavorable impact on sales in the third quarter.
Declining COVID Testing Impacts Growth
While Abbott’s diagnostic tests experienced substantial revenue growth during the COVID-19 public health emergency, there has been a persistent decline in demand following the official ending of the emergency in May 2022. In Q3 2023, Rapid Diagnostics sales decreased by 59.2% from the year-ago period due to lower demand for COVID-19 tests.
Conclusion
Abbott’s strategic initiatives and diversified product portfolio position it for long-term growth, although challenges persist in the form of foreign exchange impacts and declining COVID testing demand. Investors should closely monitor how the company navigates these challenges while capitalizing on its strengths in core diagnostics and diabetes care.
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