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Growing Biosimilars Business Supports ABT Stock, Macro Issues Hurt
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Abbott’s (ABT - Free Report) diversified business portfolio is well-positioned to drive continued momentum in 2024. Yet, the business environment continues to remain challenging globally. The stock carries a Zacks Rank #3 (Hold).
Factors Driving ABT Shares
Abbott continues to expand its Diagnostics business foothold (consisting of 22.6% of the total revenues in the third quarter of 2024). On a global scale, Abbott currently holds a prominent position in point-of-care testing, with a portfolio focused on four key areas — Infectious Disease, Cardiometabolic & Informatics, Toxicology and Consumer Diagnostics. In rapid and point-of-care diagnostics businesses, the company is successfully expanding its test menu and is also capitalizing on the growing demand for respiratory tests that can be performed at home or in more traditional healthcare settings.
Within Abbott’s Established Pharmaceuticals Division (EPD) business, the company is also strategically progressing with its advancement in biosimilars. Abbott, leveraging on its leading presence in emerging markets, enjoys a unique opportunity to scale a licensing model that is capital-efficient and can bring access to these life-changing medicines to the emerging market population. In this line, the company agreed to commercialize several biosimilars in the areas of oncology and women’s health in 2023. The first round of commercialization is on track for 2025. The company is highly optimistic about this initiative, considering the fact that biosimilars represent the highest growth segment in the branded generic pharmaceutical market.
Abbott’s Diabetes Care business continues to benefit from the growing sales of its flagship, sensor-based continuous glucose monitoring system, FreeStyle Libre. In a relatively short span, FreeStyle Libre has achieved global leadership among continuous glucose monitoring (CGM) systems for both Type 1 and Type 2 users.
In the third quarter, in Diabetes Care, sales of CGM exceeded $1.6 billion and grew 21%. In August, the company announced that it has entered into a unique global partnership with Medtronic to connect Abbott's FreeStyle Libre CGM sensor with Medtronic’s automated insulin delivery systems.
Over the past three months, shares of ABT have gained 8.3% compared with the industry’s 9.4% growth. The company’s consistent efforts to expand in high-growth areas and an array of new product launches are expected to help the stock continue its uptrend in the coming days.
Concerns Remain for Abbott
The challenging macroeconomic scenario in the form of the ongoing complex geo-political situation globally, specifically where Abbott operates, is driving higher-than-anticipated increases in expenses in terms of raw materials and freight. These could also result in broader economic impacts and security concerns, affecting the company’s business in the upcoming months. Industrywide, it has been seen that the deteriorating global economic environment is reducing demand for several MedTech products, resulting in lower sales and lower product prices while increasing the cost of goods and operating expenses of the businesses of the MedTech companies.
In the third quarter, Abbott incurred a 2.1% increase in the cost of products sold (excluding amortization expense). Selling, general and administration expenses were up 6.3% year over year.
Foreign exchange is a major headwind for Abbott because a considerable percentage of its revenues comes from outside the United States. The strengthening of the euro and some other developed market currencies has constantly been hampering the company’s performance in the international markets. In the third quarter of 2024, foreign exchange had an unfavorable year-over-year impact of 2.5% on sales.
Boston Scientific’s shares have gained 70.4% in the past year. Estimates for the company’s earnings per share (EPS) have remained constant at $2.40 for 2024 and $2.71 for 2025 in the past 30 days. BSX’s earnings beat estimates in each of the trailing four quarters, delivering an average beat of 7.2%. In the last reported quarter, it posted an earnings surprise of 6.9%.
Estimates for Baxter’s 2024 EPS have remained constant at $2.96 in the past 30 days. BAX’s earnings surpassed estimates in each of the trailing four quarters, with the average beat being 3.74%. In the last reported quarter, it delivered an earnings surprise of 3.03%. Shares of the company have risen 12.4% in the past year.
Estimates for Masimo’s 2024 EPS have risen 0.3% in the past 30 days. Shares of the company have surged 80.4% in the past year compared with the industry’s 26.2% growth. MASI’s earnings surpassed estimates in each of the trailing four quarters, with the average beat being 4.1%. In the last reported quarter, it delivered an earnings surprise of 11.7%.
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Growing Biosimilars Business Supports ABT Stock, Macro Issues Hurt
Abbott’s (ABT - Free Report) diversified business portfolio is well-positioned to drive continued momentum in 2024. Yet, the business environment continues to remain challenging globally. The stock carries a Zacks Rank #3 (Hold).
Factors Driving ABT Shares
Abbott continues to expand its Diagnostics business foothold (consisting of 22.6% of the total revenues in the third quarter of 2024). On a global scale, Abbott currently holds a prominent position in point-of-care testing, with a portfolio focused on four key areas — Infectious Disease, Cardiometabolic & Informatics, Toxicology and Consumer Diagnostics. In rapid and point-of-care diagnostics businesses, the company is successfully expanding its test menu and is also capitalizing on the growing demand for respiratory tests that can be performed at home or in more traditional healthcare settings.
Within Abbott’s Established Pharmaceuticals Division (EPD) business, the company is also strategically progressing with its advancement in biosimilars. Abbott, leveraging on its leading presence in emerging markets, enjoys a unique opportunity to scale a licensing model that is capital-efficient and can bring access to these life-changing medicines to the emerging market population. In this line, the company agreed to commercialize several biosimilars in the areas of oncology and women’s health in 2023. The first round of commercialization is on track for 2025. The company is highly optimistic about this initiative, considering the fact that biosimilars represent the highest growth segment in the branded generic pharmaceutical market.
Abbott’s Diabetes Care business continues to benefit from the growing sales of its flagship, sensor-based continuous glucose monitoring system, FreeStyle Libre. In a relatively short span, FreeStyle Libre has achieved global leadership among continuous glucose monitoring (CGM) systems for both Type 1 and Type 2 users.
In the third quarter, in Diabetes Care, sales of CGM exceeded $1.6 billion and grew 21%. In August, the company announced that it has entered into a unique global partnership with Medtronic to connect Abbott's FreeStyle Libre CGM sensor with Medtronic’s automated insulin delivery systems.
Abbott Laboratories Price
Abbott Laboratories price | Abbott Laboratories Quote
Over the past three months, shares of ABT have gained 8.3% compared with the industry’s 9.4% growth. The company’s consistent efforts to expand in high-growth areas and an array of new product launches are expected to help the stock continue its uptrend in the coming days.
Concerns Remain for Abbott
The challenging macroeconomic scenario in the form of the ongoing complex geo-political situation globally, specifically where Abbott operates, is driving higher-than-anticipated increases in expenses in terms of raw materials and freight. These could also result in broader economic impacts and security concerns, affecting the company’s business in the upcoming months. Industrywide, it has been seen that the deteriorating global economic environment is reducing demand for several MedTech products, resulting in lower sales and lower product prices while increasing the cost of goods and operating expenses of the businesses of the MedTech companies.
In the third quarter, Abbott incurred a 2.1% increase in the cost of products sold (excluding amortization expense). Selling, general and administration expenses were up 6.3% year over year.
Foreign exchange is a major headwind for Abbott because a considerable percentage of its revenues comes from outside the United States. The strengthening of the euro and some other developed market currencies has constantly been hampering the company’s performance in the international markets. In the third quarter of 2024, foreign exchange had an unfavorable year-over-year impact of 2.5% on sales.
Key Picks
Some better-ranked stocks in the broader medical space are Boston Scientific (BSX - Free Report) , Baxter International (BAX - Free Report) and Masimo (MASI - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Boston Scientific’s shares have gained 70.4% in the past year. Estimates for the company’s earnings per share (EPS) have remained constant at $2.40 for 2024 and $2.71 for 2025 in the past 30 days. BSX’s earnings beat estimates in each of the trailing four quarters, delivering an average beat of 7.2%. In the last reported quarter, it posted an earnings surprise of 6.9%.
Estimates for Baxter’s 2024 EPS have remained constant at $2.96 in the past 30 days. BAX’s earnings surpassed estimates in each of the trailing four quarters, with the average beat being 3.74%. In the last reported quarter, it delivered an earnings surprise of 3.03%. Shares of the company have risen 12.4% in the past year.
Estimates for Masimo’s 2024 EPS have risen 0.3% in the past 30 days. Shares of the company have surged 80.4% in the past year compared with the industry’s 26.2% growth. MASI’s earnings surpassed estimates in each of the trailing four quarters, with the average beat being 4.1%. In the last reported quarter, it delivered an earnings surprise of 11.7%.