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Abbott (ABT) Q3 Earnings and Revenues Surpass, Margins Dip
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Abbott Laboratories (ABT - Free Report) reported third-quarter 2023 adjusted earnings of $1.14 per share, which topped the Zacks Consensus Estimate by 3.6%. However, the adjusted figure declined from the prior-year quarter’s levels by 0.9%. The quarter’s adjustments include 32 cents of certain non-recurring items.
GAAP EPS came in at 82 cents, which increased 1.2% year over year.
Third-quarter worldwide sales of $10.14 billion were down 2.6% year over year on a reported basis. The top line exceeded the Zacks Consensus Estimate by 3.6%.
On an organic basis (excluding the impact of foreign exchange, the Cardiovascular Systems acquisition, the impact of the business exit and the impact of COVID-19 testing sales), sales rose 13.8% year over year in the reported quarter.
Q3 Results in Detail
Abbott operates through four segments — Established Pharmaceuticals, Medical Devices, Nutrition and Diagnostics.
In the third quarter, Established Pharmaceuticals’ product sales increased 3.2% on a reported basis (up 11.1% on an organic basis) to $1.37 billion. This figure compares with our model’s segmental projection of $1.21 billion for the third quarter.
Organic sales in key emerging markets improved 8.8% year over year. This was led by growth in several geographies and therapeutic areas, including cardiometabolic, women's health and central nervous system/pain management.
Abbott Laboratories Price, Consensus and EPS Surprise
The Medical Devices segment’s sales rose 16.6% year over year on a reported basis (up 14.7% on an organic basis) to $4.25 billion. This figure exceeded our segmental projection of $3.77 billion for the third quarter.
Sales growth was led by double-digit organic growth in Diabetes Care, Electrophysiology, Structural Heart and Neuromodulation. Several recently launched products and new indications contributed to the strong performance, including Amplatzer Amulet, Navitor, TriClip and AVEIR.
The Diabetes Care division reported organic sales growth of 24.5% year over year, led by FreeStyle Libre, which contributed $1.4 billion to revenues in the reported quarter. Structural Heart sales rose 15.3%, and Heart Failure sales improved 10.9% year over year organically.
The Vascular division recorded organic sales growth of 3.9% in the quarter under review. The Electrophysiology, Rhythm Management and Neuromodulation divisions recorded organic growth of 14.1%, 6% and 15.5%, respectively, in the quarter under review.
Nutrition sales rose 15.5% year over year on a reported basis (up 18.1% on an organic basis) to $2.07 billion. This figure compares with our segmental projection of $1.85 billion for the third quarter.
Pediatric Nutrition sales registered 24.9% growth on an organic basis. Adult Nutrition sales improved 12.4% organically. Per the company, Adult Nutrition sales benefited from the strong global sales performance of Abbott's market-leading complete and balanced nutrition brand, Ensure.
Diagnostics sales were down 32.7% year over year on a reported basis (down 31.9% on an organic basis) to $2.45 billion. The segment also missed our model’s projected revenues of $2.89 billion for the third quarter.
Core Laboratory Diagnostics sales were up 9.7% organically. Molecular Diagnostics declined 27.8% on an organic basis. Rapid Diagnostics sales dropped 58.9% on an organic basis, whereas Point of Care Diagnostics sales rose 9.8% organically.
Margins
In the reported quarter, the gross profit fell 4.2% year over year to $5.54 billion. The gross margin contracted 93 basis points (bps) to 54.6%.
SG&A expenses were down 0.3% year over year to $2.72 billion. R&D expenses decreased 14.1% year over year to $672 million. The company reported an adjusted operating profit of $2.14 billion in the quarter under review, down 5.5% year over year. Also, the adjusted operating margin contracted 66 bps to 21.1%.
2023 Guidance
Abbott provided updated guidance for the full year 2023.
Full-year adjusted earnings (excluding specified items of $1.28 per share) are expected in the range of $4.42-$4.46 (previously $4.30-$4.40). The Zacks Consensus Estimate is pegged at $4.40.
Abbott projects full-year 2023 organic sales growth, excluding COVID-19 testing-related sales, in the low double digits (unchanged from the previous outlook) and COVID-19 testing-related sales of around $1.5 billion (earlier $1.3 billion).
Our Take
Abbott delivered better-than-expected earnings and revenues for the third quarter of 2023. However, the figures declined on a year-over-year basis.
On a positive note, broad-based growth witnessed in the underlying base business is highly appreciating. Last month, the company acquired Bigfoot Biomedical, a leader in developing insulin management systems, which is expected to advance Abbott's efforts to develop connected solutions for making diabetes management even more personal and precise.
Within Medical Devices, the company delivered double-digit organic growth in Diabetes Care, Electrophysiology, Structural Heart and Neuromodulation in the reported quarter. Earlier in July, Abbott obtained the CE Mark for its AVEIR single-chamber leadless pacemaker for treating patients with slow heart rhythms.
Meanwhile, declines in COVID-19 testing-related sales continue to adversely affect Diagnostics sales growth, which adds to our concern. Escalating costs and expenses are putting pressure on margins.
Cardinal Health, carrying a Zacks Rank #2 (Buy), reported a fourth-quarter fiscal 2023 adjusted EPS of $1.55, beating the Zacks Consensus Estimate by 4.7%. Revenues of $53.5 billion outpaced the consensus estimate by 2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cardinal Health has an estimated long-term earnings growth rate of 14.3% compared with the industry’s 12.8% growth. CAH’s earnings surpassed estimates in all the trailing four quarters, the average being 16.03%.
Insulet, carrying a Zacks Rank #2, reported a second-quarter 2023 adjusted EPS of 38 cents, which beat the Zacks Consensus Estimate by 58.3%. Revenues of $396.5 million outpaced the consensus estimate by 3.3%.
Insulet has an estimated long-term earnings growth rate of 35.7% compared with the industry’s 13.8% growth. PODD’s earnings surpassed estimates in all the trailing four quarters, the average being 126.9%.
HealthEquity reported second-quarter 2023 adjusted earnings of 53 cents, which beat the Zacks Consensus Estimate by 12.8%. Revenues of $243.5 million surpassed the Zacks Consensus Estimate by 1.9%. It currently has a Zacks Rank #2.
HealthEquity has an estimated long-term earnings growth rate of 23.5% compared with the industry’s 13.4% growth. HQY’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 13.03%.
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Abbott (ABT) Q3 Earnings and Revenues Surpass, Margins Dip
Abbott Laboratories (ABT - Free Report) reported third-quarter 2023 adjusted earnings of $1.14 per share, which topped the Zacks Consensus Estimate by 3.6%. However, the adjusted figure declined from the prior-year quarter’s levels by 0.9%. The quarter’s adjustments include 32 cents of certain non-recurring items.
GAAP EPS came in at 82 cents, which increased 1.2% year over year.
Third-quarter worldwide sales of $10.14 billion were down 2.6% year over year on a reported basis. The top line exceeded the Zacks Consensus Estimate by 3.6%.
On an organic basis (excluding the impact of foreign exchange, the Cardiovascular Systems acquisition, the impact of the business exit and the impact of COVID-19 testing sales), sales rose 13.8% year over year in the reported quarter.
Q3 Results in Detail
Abbott operates through four segments — Established Pharmaceuticals, Medical Devices, Nutrition and Diagnostics.
In the third quarter, Established Pharmaceuticals’ product sales increased 3.2% on a reported basis (up 11.1% on an organic basis) to $1.37 billion. This figure compares with our model’s segmental projection of $1.21 billion for the third quarter.
Organic sales in key emerging markets improved 8.8% year over year. This was led by growth in several geographies and therapeutic areas, including cardiometabolic, women's health and central nervous system/pain management.
Abbott Laboratories Price, Consensus and EPS Surprise
Abbott Laboratories price-consensus-eps-surprise-chart | Abbott Laboratories Quote
The Medical Devices segment’s sales rose 16.6% year over year on a reported basis (up 14.7% on an organic basis) to $4.25 billion. This figure exceeded our segmental projection of $3.77 billion for the third quarter.
Sales growth was led by double-digit organic growth in Diabetes Care, Electrophysiology, Structural Heart and Neuromodulation. Several recently launched products and new indications contributed to the strong performance, including Amplatzer Amulet, Navitor, TriClip and AVEIR.
The Diabetes Care division reported organic sales growth of 24.5% year over year, led by FreeStyle Libre, which contributed $1.4 billion to revenues in the reported quarter. Structural Heart sales rose 15.3%, and Heart Failure sales improved 10.9% year over year organically.
The Vascular division recorded organic sales growth of 3.9% in the quarter under review. The Electrophysiology, Rhythm Management and Neuromodulation divisions recorded organic growth of 14.1%, 6% and 15.5%, respectively, in the quarter under review.
Nutrition sales rose 15.5% year over year on a reported basis (up 18.1% on an organic basis) to $2.07 billion. This figure compares with our segmental projection of $1.85 billion for the third quarter.
Pediatric Nutrition sales registered 24.9% growth on an organic basis. Adult Nutrition sales improved 12.4% organically. Per the company, Adult Nutrition sales benefited from the strong global sales performance of Abbott's market-leading complete and balanced nutrition brand, Ensure.
Diagnostics sales were down 32.7% year over year on a reported basis (down 31.9% on an organic basis) to $2.45 billion. The segment also missed our model’s projected revenues of $2.89 billion for the third quarter.
Core Laboratory Diagnostics sales were up 9.7% organically. Molecular Diagnostics declined 27.8% on an organic basis. Rapid Diagnostics sales dropped 58.9% on an organic basis, whereas Point of Care Diagnostics sales rose 9.8% organically.
Margins
In the reported quarter, the gross profit fell 4.2% year over year to $5.54 billion. The gross margin contracted 93 basis points (bps) to 54.6%.
SG&A expenses were down 0.3% year over year to $2.72 billion. R&D expenses decreased 14.1% year over year to $672 million. The company reported an adjusted operating profit of $2.14 billion in the quarter under review, down 5.5% year over year. Also, the adjusted operating margin contracted 66 bps to 21.1%.
2023 Guidance
Abbott provided updated guidance for the full year 2023.
Full-year adjusted earnings (excluding specified items of $1.28 per share) are expected in the range of $4.42-$4.46 (previously $4.30-$4.40). The Zacks Consensus Estimate is pegged at $4.40.
Abbott projects full-year 2023 organic sales growth, excluding COVID-19 testing-related sales, in the low double digits (unchanged from the previous outlook) and COVID-19 testing-related sales of around $1.5 billion (earlier $1.3 billion).
Our Take
Abbott delivered better-than-expected earnings and revenues for the third quarter of 2023. However, the figures declined on a year-over-year basis.
On a positive note, broad-based growth witnessed in the underlying base business is highly appreciating. Last month, the company acquired Bigfoot Biomedical, a leader in developing insulin management systems, which is expected to advance Abbott's efforts to develop connected solutions for making diabetes management even more personal and precise.
Within Medical Devices, the company delivered double-digit organic growth in Diabetes Care, Electrophysiology, Structural Heart and Neuromodulation in the reported quarter. Earlier in July, Abbott obtained the CE Mark for its AVEIR single-chamber leadless pacemaker for treating patients with slow heart rhythms.
Meanwhile, declines in COVID-19 testing-related sales continue to adversely affect Diagnostics sales growth, which adds to our concern. Escalating costs and expenses are putting pressure on margins.
Zacks Rank and Key Picks
Abbott currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader medical space are Cardinal Health (CAH - Free Report) , Insulet (PODD - Free Report) and HealthEquity (HQY - Free Report) .
Cardinal Health, carrying a Zacks Rank #2 (Buy), reported a fourth-quarter fiscal 2023 adjusted EPS of $1.55, beating the Zacks Consensus Estimate by 4.7%. Revenues of $53.5 billion outpaced the consensus estimate by 2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cardinal Health has an estimated long-term earnings growth rate of 14.3% compared with the industry’s 12.8% growth. CAH’s earnings surpassed estimates in all the trailing four quarters, the average being 16.03%.
Insulet, carrying a Zacks Rank #2, reported a second-quarter 2023 adjusted EPS of 38 cents, which beat the Zacks Consensus Estimate by 58.3%. Revenues of $396.5 million outpaced the consensus estimate by 3.3%.
Insulet has an estimated long-term earnings growth rate of 35.7% compared with the industry’s 13.8% growth. PODD’s earnings surpassed estimates in all the trailing four quarters, the average being 126.9%.
HealthEquity reported second-quarter 2023 adjusted earnings of 53 cents, which beat the Zacks Consensus Estimate by 12.8%. Revenues of $243.5 million surpassed the Zacks Consensus Estimate by 1.9%. It currently has a Zacks Rank #2.
HealthEquity has an estimated long-term earnings growth rate of 23.5% compared with the industry’s 13.4% growth. HQY’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 13.03%.