Abbott (ABT) Medical Devices Arm Gains Traction, FX Woe Stays
Abbott Laboratories ABT is well positioned for growth in the coming quarters, supported by its progress in diabetes. However, the business environment remains difficult. Weak growth in the nutrition sector continues to hamper sales. Abbott currently carries a Zacks Rank #3 (Hold).
Over the past year, Abbott has outperformed the industry to which it belongs. The stock gained 4.1% against the industry’s 25.1% drop. The company posted better-than-expected earnings and revenue for the first quarter of 2022. Overall, year-over-year improvements were robust. With the exception of nutrition, the company recorded organic sales growth in all of its major operating segments. Organic sales increased 17.5% in the quarter, driven by double-digit growth in medical devices, EPDs as well as diagnostics, with and without COVID testing sales.
Within EPD, Abbott achieved double-digit organic sales growth, driven by double-digit growth in several countries and key therapeutic areas, including gastroenterology, respiratory and CNS pain management.
In Diagnostics, in the reported quarter, sales of COVID tests were $3.3 billion. Excluding sales of COVID tests, global diagnostics sales increased by more than 12% thanks to the successful deployment of the Alinity suite.
Within medical devices, sales increased 11.5% in the quarter, driven by double-digit growth in diabetes care, structural heart, heart failure and electrophysiology. In diabetes care, FreeStyle Libre sales increased over 25% on an organic basis and until the announcement of the first quarter results, the user base reached approximately 4 million users in the world.
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In cardiovascular devices, despite the first quarter procedure volume adverse scenario on high COVID case rates early in the year, Abbott saw steady improvement in procedure trends as case rates declined during the second half of the quarter and that trend continued into April. In terms of product development, the company received FDA approval for Aveir, its lead-free pacemaker to treat patients with slow heartbeats. Additionally, CardioMEMS has received expanded indication in the US to treat more patients with early stages of heart failure. Abbott also received FDA clearance for the company’s latest generation EnSite X system, which provides a 360-degree view of the heart for better cardiac mapping.
Within nutrition, while the pediatric nutrition business slowed, the adult nutrition business continued to perform well with global organic sales growth of 11.5%, driven by the Ensure and Glucerna from the company.
On the other hand, within Abbott’s Nutrition business, global nutrition sales were down 7% on a reported basis and 4.4% on an organic basis in the first quarter. During the quarter, sales were negatively impacted by a voluntary recall of certain powder formulas manufactured at one of Abbott’s US facilities. As a result, worldwide Pediatric Nutrition sales decreased 20.6% reported and 18.8% organic. Internationally, Pediatric Nutrition sales were negatively impacted, mainly by difficult market conditions in China.
Additionally, during the first half of the first quarter, for cardiovascular devices, procedure volumes were negatively impacted by high rates of COVID cases. This hampered overall sales growth within this company.
Additionally, in the first quarter, the U.S. dollar continued to appreciate against several currencies, which translated into a more adverse impact on sales versus foreign exchange rates when the results of the fourth quarter in January. Abbott reported an unfavorable foreign exchange effect of 3.7% year-over-year in the first quarter.
A few higher ranked stocks in the broader medical field are UnitedHealth Group Incorporated A H, Medpace Holdings, Inc. MEDP and Alkermes plc ALKS.
UnitedHealth, having a No. 2 Zacks ranking (buy), reported earnings per share (EPS) of $5.49 in the first quarter of 2022, which beat the Zacks consensus estimate by 1.7%. Revenue of $80.1 billion topped the consensus mark of 14.2%.
You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings have exceeded estimates for the past four quarters, with the average surprise being 3.7%.
Medpace reported Q1 2022 Adjusted EPS of $1.69, which beat Zacks’ consensus estimate of 34.1%. Revenue of $330.9 million beat Zacks’ consensus estimate by 1.1%. He currently has a No. 2 Zacks rank.
Medpace has a historic growth rate of 27.3%. MEDP’s earnings have exceeded estimates for the past four quarters, with the average surprise being 17.1%.
Alkermes reported adjusted EPS of 12 cents in the first quarter of 2022, which beat Zacks’ consensus estimate by a penny. Revenue of $278.6 million beat Zacks’ consensus estimate by 6.2%. He currently sports a No. 1 Zacks rank.
Alkermes has an estimated long-term growth rate of 25.1%. ALKS earnings have exceeded estimates for the past four quarters, with the average surprise being 350.5%.
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