Abbott Labs (ABT, Financial) saw its shares rise by 1% after reporting a slight beat in Q3 earnings, with revenue growth aligning with analyst expectations. Concerns were present due to Johnson & Johnson's (JNJ, Financial) recent weak performance in Asia-Pacific, especially China, where Abbott earns about 20% of its revenue. However, Abbott remains optimistic about China as a lucrative market, and its solid Q3 results have bolstered investor confidence.
- Sales increased by 4.9% year-over-year in Q3, or 7.6% on an organic basis, reaching $10.63 billion. Excluding COVID testing sales, Abbott's revenue grew by 8.2%. Segment performance varied, with Nutrition and Diagnostics experiencing slight declines of 0.3% and 1.5%, respectively. In contrast, Established Pharmaceuticals and Medical Devices saw increases of 2.7% and 11.7%. Adjusting for FX impacts and COVID-19 testing, all segments showed positive growth.
- The Nutrition segment showed strength in the U.S., with sales up 11.9% year-over-year on an adjusted organic basis. Pediatric Nutrition sales rose by 12%, driven by market share gains in infant formula. Adult Nutrition sales increased by 11.5%, fueled by demand for high-protein, low-sugar products like Ensure and Glucerna.
- Diagnostics faced challenges due to its reliance on COVID-19 testing kits. Excluding this impact, the segment grew by 3.3%, with Core Laboratory Diagnostics achieving significant account wins expected to support growth through 2025.
- Established Pharmaceuticals and Medical Devices were Q3 highlights. EPE's revenue, affected by a 4.3-point currency fluctuation hit, comes entirely from international markets. Double-digit growth was recorded in Latin America, Southeast Asia, and the Middle East. Medical Devices saw robust sales growth, particularly in Diabetes Care, where continuous glucose monitor sales surged by 19.1%.
- Abbott maintained a conservative outlook, keeping its FY24 organic growth forecast of 9.5-10% unchanged. The company projected Q4 adjusted EPS of $1.31-1.37, aligning with market consensus.
Investors responded positively to Abbott's Q3 results, mirroring the reaction to JNJ's recent earnings. Despite not raising its outlook, Abbott's history of conservative guidance has prevented any negative sentiment from emerging.
