Here's Why You Should Hold on to Abbott (ABT) Stock for Now

Abbott Laboratories ABT has been gaining from strong operating segments as well as its performance in the emerging markets. Also, the company has been helping to combat the coronavirus outbreak. However, we are concerned about its Rhythm Management product line’s performance as well as foreign exchange impacts.

Over the past year, shares of the Zacks Rank #3 (Hold) company have lost 0.4% compared with the industry’s 14% decline.

The renowned provider of a diversified line of healthcare products has a market capitalization of $139.91 billion. The company projects 10.6% growth for the next five years and expects to maintain its strong performance. Further, it delivered a positive earnings surprise of 1.5%, on average, over the trailing four quarters.

Let’s delve deeper.

Contributions to Combat Coronavirus Outbreak: We are upbeat about Abbott’s efforts to contain the global coronavirus outbreak. Recently, it received the FDA’s Emergency Use Authorization (EUA) for its molecular point-of-care test, ID NOW COVID-19, for the detection of the coronavirus in just five minutes. Prior to this, the company received a EUA for its RealTime SARS-CoV-2 test. Abbott’s target of producing about 5 million tests per month, combining the two EUA tests, buoys optimism.

Segmental Performance: We are upbeat about the robust and consistent performance of the Established Pharmaceuticals Division and Medical Devices organically over the recent past. Particularly, Abbott has been riding high on healthy growth graph within its Diabetes Care business, on strength in its continuous glucose monitoring system, FreeStyle Libre System. Also, solid contributions from the company’s Nutrition segment buoy optimism. Moreover, its emerging market performance has been promising on several developments.

Potential in Rapid Diagnostics: We are upbeat about the progress made by Abbott in the Rapid Diagnostics space.  In the fourth quarter of 2019, Rapid Diagnostics sales reported robust year-over-year growth on an organic basis, led by growing infectious disease testing in developed markets and cardio-metabolic testing globally.

Downsides

Ailing Rhythm Management Sales: We are concerned about Rhythm Management product line’s performance in the fourth quarter. Sales in the United States were soft and sharply declined year over year organically. Although Abbott is coming up with certain measures, including organizational changes and product innovations, its near-term outlook is bleak.

Foreign Exchange Impacts: Foreign exchange is a major headwind for Abbott as a considerable percentage of its revenues come from outside the United States. The strengthening of euro and some other developed markets’ currencies have been constantly hampering the company’s performance in the international markets.

Estimate Trend

The Zacks Consensus Estimate for Abbott’s first-quarter 2020 revenues is pegged at $7.98 billion, suggesting a 5.9% rise from the year-ago reported number.

Key Picks

Some better-ranked stocks from the broader medical space are ResMed Inc. RMD, QIAGEN N.V. QGEN and Phibro Animal Health Corporation PAHC.

ResMed has a projected long-term earnings growth rate of 14.4%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

QIAGEN’s long-term earnings growth rate is estimated at 10%. The company presently has a Zacks Rank #2.

Phibro’s long-term earnings growth rate is estimated at 2.1%. It currently flaunts a Zacks Rank #1.

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ResMed Inc. (RMD) : Free Stock Analysis Report
 
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