On Wednesday, Evercore ISI adjusted its outlook on Abbott Laboratories (NYSE:ABT), increasing the price target to $128.00 from $124.00, while maintaining an Outperform rating on the stock. The firm's update followed Abbott's report of an organic growth rate, excluding COVID-related business, of 8.2%, which was slightly below the first half's growth of approximately 10%. The slower growth was attributed to one-time issues in the International Nutrition and Core Laboratory divisions within Diagnostics.
Specifically, Abbott faced a loss of market share in a certain geography, leading to reduced channel inventory in the Nutrition segment. Additionally, the implementation of the China Volume-Based Procurement policy, anticipated price hardware changes, and a pause in customer purchases in the Diagnostics segment negatively impacted the quarter's results. These factors together were estimated to have a 120 basis points impact on the quarter. However, this was somewhat offset by better-than-expected COVID-19 related revenues and a robust 13% growth in the overall Medical Technology sector.
Within the Medical Technology division, notable growth was observed in various product lines. The Libre continuous glucose monitoring system maintained a growth rate of around 21%, consistent with the second quarter. Structural Heart products accelerated quarter-over-quarter with a 16.5% increase, while Electrophysiology, including ablation catheters and mapping products, saw double-digit growth, surpassing that of Johnson & Johnson. Heart Failure treatments continued to show double-digit growth, and Cardiac Rhythm Management, driven by the Aveir leadless pacemaker, grew around 6%.
Looking beyond the quarter, three elements were highlighted by the analyst as particularly positive. Abbott reaffirmed its full-year guidance of 9.5-10% growth despite the third quarter's one-off issues, showcasing confidence in its growth drivers. The company also achieved its earnings per share target in the second quarter, indicating the durability and consistency of its earnings performance. Lastly, management's reaction to the joint statement by the FDA, CDC, and NIH on Necrotizing Enterocolitis (NEC) was seen as a strong indication of Abbott's ability to manage NEC litigation risks. This statement noted a lack of conclusive evidence linking NEC and infant formula, which is expected to be considered in upcoming Federal Court cases.
In addition to these observations, Abbott's Board of Directors has authorized a new $7 billion share repurchase program, further signaling the company's confidence in delivering high single-digit revenue growth and double-digit earnings per share. The new price target of $128 reflects approximately 20 times the projected CY25 EBITDA and 25 times the price-to-earnings ratio.
In other recent news, Abbott Laboratories reported a third-quarter revenue surpassing expectations by $91 million, mainly due to strong performance in its Medical Devices segment. The company's total revenue reached $10.635 billion, marking an 8.2% year-over-year organic growth excluding COVID-19 test sales. Abbott's adjusted earnings per share (EPS) of $1.21 beat forecasts by one cent.
The company has updated its full-year guidance, now anticipating an adjusted EPS range of $4.64 to $4.70. BTIG adjusted its outlook on Abbott Labs, increasing the price target to $139 from $135 and sustaining a Buy rating on the stock. JPMorgan has raised its price target for Abbott's shares to $135, anticipating strong third-quarter 2024 earnings.
InvestingPro Insights
Abbott Laboratories' strong market position and financial health are further underscored by recent data from InvestingPro. The company's market capitalization stands at an impressive $205.36 billion, reflecting its significant presence in the Healthcare Equipment & Supplies industry. This aligns with the InvestingPro Tip highlighting Abbott as a prominent player in its sector.
The company's commitment to shareholder value is evident in its dividend history. An InvestingPro Tip reveals that Abbott has maintained dividend payments for 54 consecutive years and has raised its dividend for 11 consecutive years. This consistent dividend growth, coupled with a current dividend yield of 1.9%, demonstrates Abbott's financial stability and commitment to returning value to shareholders.
Abbott's recent performance is also noteworthy, with a one-year price total return of 28.41% as of the latest data. This strong performance is reflected in the stock trading near its 52-week high, with the current price at 97.21% of its 52-week high.
For investors seeking more comprehensive insights, InvestingPro offers 12 additional tips on Abbott Laboratories, providing a deeper understanding of the company's financial health and market position.
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