Abbott Laboratories (ABT) on Q1 2023 Results - Earnings Call Transcript
Operator Good morning and thank you for standing by. Welcome to Abbott's First Quarter 2023 Earnings Conference Call. All participants will be able to listen-only until the question and answer portion of this call. [Operator Instructions] This call is being recorded by Abbott. With the exception of any participants' questions asked during the question-and-answer session, the entire call, including the question-and-answer session, is material copyrighted by Abbott. It cannot be recorded or rebroadcast without Abbott's expressed written permission.I would now like to introduce Mr. Scott Leinenweber, Vice President, Investor Relations, Licensing and Acquisitions.Scott Leinenweber Good morning and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer; and Bob Funck, Executive Vice President, Finance and Chief Financial Officer. Robert and Bob will provide opening remarks. Following their comments, we'll take your questions.Before we get started, some statements made today maybe forward-looking for purposes of the Private Securities Litigation Reform Act of 1995, including the expected financial results for 2023. Abbott cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements.Economic, competitive, governmental, technological and other factors that may affect Abbott's operations are discussed in Item 1A, Risk Factors to our annual report on Form 10-K for the year ended December 31st, 2022.Abbott undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law. On today's conference call, as in the past, non-GAAP financial measures will be used to help investors understand Abbott's ongoing business performance. These non-GAAP financial measures are reconciled with the comparable GAAP financial measures in our earnings news release and regulatory filings from today, which are available on our website at abbott.com.Note that Abbott has not provided the GAAP financial measure for organic sales growth. On a forward-looking basis, because the company is unable to predict future changes in foreign exchange rates, which could impact reported sales growth. Unless otherwise noted, our commentary on sales growth refers to organic sales growth, which is defined in the quarterly results press release issued earlier today.With that, I will now turn the call over to Robert.Robert Ford Thanks, Scott. Good morning, everyone, and thank you for joining us. Today, we reported strong results to start the year. First quarter adjusted earnings per share were $1.03, which was above consensus estimates, driven entirely by strong underlying base business performance excluding COVID testing.Organic sales growth excluding COVID testing increased 10%, led by double-digit growth in Medical Devices, Established Pharmaceuticals and Nutrition. As you'll recall, back in January, I expressed some optimism that the headwinds Abbott and other companies faced over the last few years were starting to peak, and in some cases, ease a bit. As we move through the first part of the year, that's exactly what we continue to see.Most notably, the impact of COVID has rapidly and significantly lessened. As part of this transition, certain behavioral shifts have been evident across society. One simple illustrative example has been a significant increase in travel and tourism we've all seen, heard about or experienced first-hand.A much more relevant and important behavioral shift that we're seeing in healthcare globally has been the increased priority people are putting on getting healthy and staying healthy. And for our businesses, the impacts have been increased routine diagnostic testing volumes, improved medical device procedure trends and strong demand for consumer based health products. The net result this past quarter was strong broad-based growth across our portfolio.Importantly, this growing focus on health adds to and enhances other favourable demographic trends such as a global population that's growing older and living longer and increasing access to healthcare around the world. The combination of these favourable market dynamics, along with the strength of our growth platforms and new product pipeline provides a strong foundation for sustainable top-tier growth going forward.I'll now summarize our first quarter results in more detail before turning the call over to Bob. I'll start with Established Pharmaceuticals or EPD where sales increased 11% in the quarter. This continues EPD's impressive stretch of consistent strong performance, including double-digit growth each of the last two years. Growth this past quarter was led by strong performance in Brazil, China, and Southeast Asia and across several therapeutic areas, including cardiometabolic, gastroenterology, CNS and pain management.Turning to Nutrition where sales increased more than 10% in the quarter. In the US, pediatric nutrition growth of more than 35% included the impact of lower sales in the first quarter of last year due to a voluntary recall of certain infant formula products. We continue to make good progress, increasing manufacturing production and recovering market share in this business. Internationally, total nutrition sales grew mid-single digits overall and sales in global adult nutrition also grew mid-single digits driven by strong performance of our market leading Ensure brand.Moving to Diagnostics where, as forecasted, sales growth was negatively impacted by a significant decrease in COVID testing sales compared to the first quarter of last year. Excluding COVID testing, organic sales growth was led by mid to high single-digit growth in Core Lab, Rapid and Point of Care Diagnostics.In Core Lab Diagnostics, growth was led by strong performance in the US and Europe, which was partially offset by soft market conditions in China early in the year where we're seeing improving market demand over the last several weeks. Excluding China, Core Laboratory Diagnostics sales grew nearly 8% globally.And I'll wrap up with Medical Devices, where sales grew 12.5% globally on an organic basis, including mid-teens growth in US and double-digit growth internationally. In Diabetes Care, sales of FreeStyle Libre grew more than 25% on an organic basis in the quarter, including approximately 50% growth in the US and mid-teens internationally.During the quarter, Libre received US FDA clearance for connectivity with automated insulin delivery systems. We're working with leading insulin pump manufacturers to integrate their systems with both Libre 2 and Libre 3 as soon as possible.In Cardiovascular Devices, sales grew more than 8% overall in the quarter and impressively, organic sales growth rates improved sequentially compared to the prior quarter in every one of our Cardiovascular Device businesses. This broad-based strength was led by strong double-digit growth in Heart Failure and Structural Heart.In Heart Failure, sales of CardioMEMS grew more than 30%, which represents a third quarter in a row that CardioMEMS sales have grown more than 25%. In Electrophysiology, performance was led by high teens growth in Europe, including strong broad-based performance across big five European countries, which was driven by cardiac ablation catheters and mapping systems.In Structural Heart, growth was led by double-digit growth of MitraClip along with strong contributions from three recently launched products Amulet, Navitor, and TriClip which combined to grow nearly 50% in the quarter. And lastly, in Neuromodulation, sales grew 11% driven by recent launch of Eterna, our first rechargeable neurostimulation device for pain management, which targets a large segment of the market where we didn't previously compete.So, in summary, we're off to a very good start to the year exceeding financial expectations on both top and bottom lines. The strong performance we're achieving is broad-based and fueled by strong execution, new products and improving market conditions and our core foundational growth platforms have strong momentum and are achieving exceptional results, positioning us well for top-tier growth going forward.I'll now turn over the call to Bob. Bob?Bob Funck Thanks, Robert. As Scott mentioned earlier, please note that all references to sales growth rates unless otherwise noted are on an organic basis.Turning to our first quarter results. Sales decreased 14.5% on an organic basis due to, as expected, a year-over-year decline in COVID testing related sales. Excluding COVID testing related sales, underlying base business organic sales growth was 10% in the quarter.Foreign exchange had an unfavourable year-over-year impact of 3.3% on first quarter sales. During the quarter, we saw the US dollar strengthen somewhat versus several currencies, which resulted in a slightly more unfavourable impact on sales compared to exchange rates at the time of our earnings call in January.Regarding other aspects of the P&L, the adjusted gross margin ratio was 55.9% of sales, which reflects flow-through impacts from the elevated inflation we experienced last year on certain manufacturing and distribution costs as well as an unfavourable impact from foreign exchange. Adjusted R&D was 6.4% of sales and adjusted SG&A was 28.3% of sales in the first quarter. Lastly, our first quarter adjusted tax rate was 14%.Turning to our outlook for the full year, we now forecast total underlying base business organic sales growth excluding COVID testing sales to be at least high single-digits. We're now forecasting COVID testing related sales of around $1.5 billion, which is below the full-year forecast of approximately $2 billion we provided in January due to current testing dynamics we're seeing in the market. For the second quarter, we forecast COVID testing sales of around $200 million.Based on current rates, we expect exchange to have an unfavourable impact of a little more than 1% on full-year reported sales, which includes an expected unfavourable impact of a little more than 2% on second quarter reported sales.Lastly, our full-year adjusted earnings per share guidance of $4.30 to $4.50 remains unchanged, but now reflects a lower earnings contribution from COVID testing sales compared to expectations in January, offset by raising our underlying base business earnings forecast by a little more than $0.10 based on our strong performance and outlook.With that we'll now open the call for questions.Question-and-Answer Session Operator Thank you. At this time, we will conduct a question-and-answer session. [Operator Instructions] And our first question will come from Larry Biegelsen from Wells Fargo. Your line is open.Larry Biegelsen Good morning. Thanks for taking the question and congratulations on a nice start to the year. So, Robert, you raised the base business organic growth and held EPS flat despite lower expected COVID testing sales. Can you please provide more color on the trends you're seeing across your businesses and geographies that allowed you to maintain EPS? And how does that feed into 2024? It sounds like you're thinking more about the base business ex-testing going forward. And I have one follow-up.Robert Ford Sure, Larry. I mean, I think you've summarized it pretty well there. We reduced our COVID forecast right now from $2 billion to about $1.5 billion, but maintained the previous guidance and that was a result of a better performance that we're seeing in our base -- in our underlying base business. I think that's actually a pretty great trade-off to have our base business have a raise of just over $0.10 here, offsetting this decline in COVID testing.As I said in my comments in the beginning, Larry, back in January, we were seeing already some signs of a better environment, right? Specifically in Devices, we're starting to see already the hospitals and the systems start to get the handle on staffing shortages. From an inflation perspective, we talked about some of the commodity starting to turn a little bit, not all of them, but some of them starting to turn. So that's really translated, I'd say, in improving top line on the base business, better diagnostic testing, more procedures.I'd say if you look at the procedure trends throughout the quarter, if you look at cardio specifically of around 8%, you look at the way we exited February and specifically March, there were double-digits in March. So the real impact there was, I'd say, the reopening of China in January, in the beginning of the quarter. That created a little bit of friction, but it was pretty broad-based across the systems in Diagnostics and Devices. US, Europe, Asia, we saw a good performance in Japan also.So that gave us a lot of confidence that we're on the right trajectory here. And I'd say we're forecasting at least these high single-digit growth for the base business. And that's because of what we've been talking about over these last couple of years, which is reinvesting some of those COVID revenues and profits into the base business.So we're able to drive accelerated growth here without having to provide extra funding, let's call it that way to that growth. So I think this is a real strong start to the year to see double-digits in Devices, EPD, Nutrition, we continue our recovery there. So it's a real good strong start to the year. I think it's very sustainable. Of course, we're going to keep pushing and wanting more, but I think it's a good starting point.Regarding your 2024 question, I get it. These last couple of years, Larry, usually in our first calls, it's always about what's going to happen the next year because of COVID. So I get that question. I'd say right now, I'm not going to give any specific guidance, but if you look at our underlying base business, we're a little over, right now we're forecasting for this year, a little over $4 of EPS.And we always start our planning process here as double-digits. This year, we're forecasting really strong double-digit growth because like I -- like we've talked about, making those investments, getting the leverage through the P&L, not having to invest to get that additional earnings growth.And that's our starting point as we go into next year, targeting that double-digit EPS growth. And I think it starts with driving a strong top line. And if we maintain the strong top line, which I'm sure we'll get into all the growth drivers here, I feel very good about them and the sustainability of them and the investment and the execution.So we keep that strong top line. There's obviously work that we got to continue to do on margin and margin expansion, and that's a big area of focus for us. But those are really the elements here, strong top line on the base business going into 2024 and targeting that double-digit growth with that top line and margin expansion.Larry Biegelsen That's super helpful. Just for my follow-up, Robert, cardio-neuro was strong this quarter at about 8.5% organic. Can you talk about the trends there and the sustainability of that? There's still concerns in the investment community about your EP business with PFA competition coming. Thank you.Robert Ford Sure. Well, like I said, I think the trends in the quarter were very positive. I think like I said, I think it's a combination of improving conditions. I think the hospital systems have done a really good job right now at managing through the staffing shortages and we're starting to see the impact there and then the combination of our product launches and execution of those product launches.Like I said, I think it was pretty broad-based across the geographies. And really the only challenge we had was in January in China, but I think we're starting to see again a lot of growth in that market too. So I think it's very sustainable. Regarding your question on PFA, yeah, I mean, I think it's an interesting technology. We've been working on it for several years now, Larry, and haven't been as public about what we're doing. That's probably driven by my direction for the team, but I think we'll share more about it at HRS this year in terms of everything we've done.As a backdrop to that, I guess, I would say one of the benefits of having a very large installed open mapping system base on the markets, we actually get to see these systems being used in real world. And it's a great product development tool, to be quite honest with you. So a lot of our focus in the development of our program, Larry, is really looking at some of the gaps and some of the challenges we're seeing in these first generation catheter systems and really looking at addressing those. So I think what the team has been working on is really unique and differentiated.So I don't think that PFA will be the one tool to rule all tools. I think that it will be a tool that will be important. We're obviously working on our system. I think that the companies that are going to be winning in this space are going to be those that can effectively work with PFA, and at the same time work with RF.So I think there are a couple of questions that are going to still need to be answered over the next 12 to 18 months, Larry. I think safety and efficacy is one that still needs to be, you know, we see certain signals in certain markets. So those, I think, need to kind of work their way through the type of cases, type of patients that are going to be used with this product.I think one big question on the PFA is kind of can it actually improve real world procedure times. I think that's the big question I have in terms of what I've been seeing, what our teams have been seeing. And then given all the pressures that the health systems have is a 3x to 4x premium on RF is that actually sustainable.So bottom line, I think our device, cardio device portfolio is well developed across all the different areas of growth opportunities that we have. And I think that PFA is going to be an important technology that we've been working and investing on to bring to market and looking more as a second generation product.Larry Biegelsen Perfect. Thanks so much.Operator Thank you. Our next question comes from Joshua Jennings from Cowen. Your line is open.Joshua Jennings Hi. Good morning. Congrats on the strong start to the year. I was hoping to ask one question and a related follow-up. What did, Rob, just to help think through some of the core gross margin and operating margin trajectories -- of the core business with the COVID testing volumes coming down and the historic margin contribution in the last couple of years, but I'd love to just hear about drivers of gross and operating margin expansion. In pre-COVID, we were thinking 50 basis points or up to 50 basis points of operating margin expansion was plausible for your business. And maybe just help us think through the trajectories, but also any levers you can pull to support double-digit EPS growth trajectory in 2024, if there's some unpredictable headwinds that pop up. I just have one related follow-up.Robert Ford Sure. I mean, I think, as I said to Larry, I mean, I think it starts with the top line, right, and being able to drive that top line and especially the top line coming from our med device portfolio, which obviously has margins that are accretive to the overall company.So looking at the growth drivers there, whether it's the Structural Heart portfolio, the EP portfolio, Libre in diabetes, a recovery in Nutrition, I mean, I think these are all important areas of top line growth that will drive accretion to our margins. One of the challenges that we all faced has been the impact of inflation on our input costs.And as I said, I think some of those are normalizing a little bit. I think last year a lot of the focus was just to ensure that we had access to all the raw materials, right. And I think in those situations, we ultimately had to deal with elevated prices. And I think that some of these will unwind over time. This is not a -- I don't think this is a quick fix, but it's definitely an area that we're going to see steady improvement over the next couple of years here in terms of improvement.We've been able to take price where we can to offset some of those inputs, those cost input increases, but I think it's really the focus on the top line with our device portfolio that drives the accretion and then combined with focusing on our gross margin improvement programs, which we have across all of the businesses and then get the attention and then focus every month in our operating meeting. So the combination of those two factors are what gives us confidence for that margin expansion.Operator Mr. Jennings, please make sure your line is not on mute.Joshua Jennings Thank you very much. I was on mute. Apologize. Thanks for that answer. And want to just -- related follow-up, you really touched on taking price, Rob. And would love to hear, mostly on the device business, how pricing is shaping up in 2023, but also if you could touch on any other businesses where price is turning into a tailwind for your business that would be great to hear. Thanks for taking the questions.Robert Ford Yeah. I think on price, we've historically, as a company, our high single-digit growth really driven by volume, whether it's expanding markets or taking market share. I'd say on the device side, pricing historically has been a headwind for us. I'd say over the last 12 to 18 months, it hasn't been one. So we've been able to at least kind of hold pricing, I wouldn't say gone out and did big pricing increases, but at least been able to hold pricing.I'd say more on the consumer side of the business, Josh, is where we've been able to kind of take price. If you look at our Nutrition business, we haven't been able to offset 100% of the commodity increase, but we've been able to apply some price increases globally across the portfolio.In our Established Pharmaceutical business, there are segments of the market where it is more kind of cash pay, and we've been able to implement pricing increase in there. I think the team in EPD has done a pretty good job at how to implement those and still have good share positions across our therapeutic areas.So those are probably the areas that we've been able to implement pricing increases. And to your point on tailwinds, if we start to see the commodities and some of the input costs come down, especially in these more consumer based businesses, I think the strength of our brands, whether it's in Nutrition or in EPD, there is an opportunity there to have that kind of tailwind.Joshua Jennings Great. Thanks again.Operator Thank you. Our next question comes from Robbie Marcus from JPMorgan. Your line is open.Robbie Marcus Great. Congrats on a nice quarter here. Maybe to start, Robert, we just saw you get approval earlier this week for Medicare reimbursement for Type 2 patients that use basal insulin for Libre 3. Clearly, a really big opportunity, but would love to get your thoughts on, first, how this impacts Abbott and then broader how you see improving reimbursement both in the US around the world evolving over the next few years and the benefit it could add to the Libre business?Robert Ford Sure, Robbie. I talked about how this is an important part of the growth strategy and an important part of the market opportunity for CGMs as a whole. We've been investing in generating the clinical data to be able to kind of support this.So this is a great opportunity for us. I'd say I talked about, there's about 4 million Type 2 basal insulin users here in the US. About a third of them are on Medicare. So it will start there. I think we built a robust kind of position in this patient segment and that includes not only the clinical data that we produced, but building a sales force that's focused more on the primary care side. I think the product lends itself very well to this patient population also.So I think we're excited about the opportunity. I think I've sized it at about $1 billion plus in terms of opportunity in the short term here. And as the CMS reimbursement starts to play out, we know that there will be eventually a spill-on onto private payers here in the US. It's difficult to forecast that because each plan will look at its own population and make its own determinations, but I think that provides a nice tailwind of growth here over the next couple of years for this franchise.And I don't think it's just a US situation. We're seeing other countries around the world also start to expand the reimbursement. And it's a combination of both the clinical data that supports the use of CGMs on this patient group and also specifically, I'd say, for FreeStyle Libre, the value proposition in terms of being able to support a larger group of patients have the benefits without necessarily having to have a significant premium, I guess, call it over that.So we've seen markets outside US already kind of do that and we're seeing good results in terms of its implementation. So I think it's a great opportunity for the category and more specifically for Libre.Robbie Marcus Great. And maybe a quick follow-up here. Structural Heart had been challenged throughout the pandemic and here we are with a nice double-digit growth quarter from you. Can you speak to -- is this the start of a strong recovery here? Anything in the quarter that feels durable to you? And then also, you had some, in my opinion, good TriClip data at ACC earlier this year. Your thoughts on how that might evolve over the year as well. Thanks.Robert Ford Yeah. I mean, I think we've always looked at our Structural Heart portfolio over at least the last three, four years and made all the investments in terms of building a product pipeline, building commercial infrastructure globally in the market.So this is definitely an area of growth. I think the entire portfolio there looks really strong and really durable and really sustainable, Robbie, whether it's our position in mitral, our building of our position in the tricuspid area. We're entering the aortic area with Navitor, seeing good momentum over there also.Amulet, the launch of Amulet also. So I think we've really built a strong pipeline of products and commercial footprint here. So I think it's doing what -- this quarter, what we've always envisioned it to do, which is to be a top-tier growth contributor to Abbott.Regarding your question on TriClip. Yeah, I agree, with you too. I was pleased with the results. I was pleased with the outcome. As I said in the past, I don't think it's a one study and that's it. I think you have to continue to invest in generating clinical data. It's what we did with MitraClip. But the trial enrolled really fast and I think that's always a good sign in terms of the speed of enrollment. In terms of its acceptance and excitement from the physicians. And that's because there's not a lot of good treatment options for these patients.As you know traditional surgery over here has got a high mortality rate and diuretics don't really work well. So I think the measures we saw in terms of the TR reduction, the quality of life improvement scores, I think they are probably some of the best that we've ever seen in a heart failure trial. So the bottom line, I think, these patients are in rough shape and I think the physicians know this. So we feel good about the data.We've already submitted it to the FDA. So that's been submitted. I know the CMS will probably review this in parallel and I believe that clip based devices here are going to be the first option. They've got strong efficacy data and a very good safety data also. So I think -- you think it's good data, I think it's good data too, and I'm cautiously optimistic here of bringing this product.We're seeing great momentum in Europe. So that's a proof point here that I can tell you there is a lot of great growth that we're seeing in Europe. So --Robbie Marcus Thanks a lot.Operator Thank you. Our next question will come from Rick Wise from Stifel. Your line is open.Rick Wise Good morning, Robert. Good to hear your voice. Sorry for my scratchy voice a little bit. I was hoping we could talk about diagnostic, broadly ex-COVID. You are thinking about what's next, broadly for the franchise as COVID wanes, but more specifically, we haven't had an Alinity update in a while. I know this is a multi-platform, multi-year rollout process. Where are we in that process? How much more do we have to go? And any other diagnostic perspectives you'd want to share? Thanks, Robert.Robert Ford Thanks, Rick. Yeah, I mean, I think so the way we were thinking about Alinity and Alinity rollout, it was a multi-platform, multi-year rollout, right? If you look at these contracts that you enter in there between seven to 10 years, you're really looking at 12%, 15% of the market that's up for renewal every year.So we always looked at this as multi-year. It did take a back seat a little bit, I would say, during COVID as a lot of the hospital systems weren't necessarily focused on RFPing their diagnostic, really just focusing on treating patients and doing the tests related to COVID. So what we began to see, I'd say, probably middle of last year, definitely into the end of the last -- definitely into Q4 of last year and going into this quarter is those RFPs in that process are restarting back up again. So and I think we saw this a little bit on our growth rate here, again, excluding COVID.And you look at our Core Lab business, which is the predominant base of our diagnostic business growing 7% if you take out China, which started off a little bit roughly in the 8%, which is the range that we tend to target here, Rick. So I think we're restarting the process and reaccelerating it. I think it's going well. I think we saw a good growth in the US and good growth in Europe and that's good.One of the areas that got impacted during COVID also was transfusion. So we saw a drop in donations during COVID. So I'm glad there was inventory in the blood banks to be able to deal with that, but now we're starting to see donations start to ramp up again and the rebuilding of inventories and the picking up of donations.So I think that that's also another positive sign. And specifically on the blood bank side, our system, The Alinity s System, it really requires a lot less manual labor. There's a lot of automation in there. And I think that's something that we're seeing a lot from the blood banks as donations are ramping up again, the ability to take advantage of that increased demand with our system.So I would say that we could probably grow faster than that, but I think it would come at some margin erosion because you're going to have to place a lot of boxes to be able to get to the double-digit growth. So I think that this growth rate that we've established here 7%, 8%, 8.5% is the right growth rate where we can actually drive top line growth and at the same time, drive bottom line profitability.I think our margin profile in this business is probably one of the highest amongst the industry. So I think the team has done a really good job at finding that right balance. So all-in-all, I think it took a little bit of break during COVID, but it's restarted right now, and I like the systems we have, the position we have, and the commercial execution that's in place.Rick Wise Okay. It's very thorough. Thank you. As a follow-up, I wanted to focus on Nutritional, but I'm going to also sneak in a quick CardioMEMS as well. Nutritional, it's great to see the 10% performance, the strong US recovery. It sounds like you're making solid progress. What's next? When do we get back to normal in your view? And what is the new normal growth? And just to sneak in the CardioMEMS, jeez, I've been watching the CardioMEMS story, Robert, for over a decade, back to St. Jude days. And I always thought it was great technology. What's Abbott's special sauce that you're driving such a superb performance? And where do we go from here with CardioMEMS? So why is -- what's happening? Thank you.Robert Ford I guess on the Nutrition side, I think the team has made a lot of progress. They work incredibly hard at this. Our manufacturing and our market recovery are in line with our expectations. I've talked about -- we've talked about this business being between 4% to 6% in terms of the target growth range, maybe towards the upper end of that range. And ultimately, that's when everything kind of normalizes and you don't have some of these comps. That's what I expect this business to be in.Regarding CardioMEMS, this has been a little bit of a journey for us. I think we found the right combination here of what I would call making the investments that we needed to make on the clinical -- generating the clinical data and the clinical trial. We've obviously had an expansion in our label that happened last year, but I think the biggest and most important part here is commercial execution on the ground and thinking about workflow in the hospital systems, right, managing that and addressing that and working with the hospitals to address this workflow has been probably the biggest impact that the team has had. And then we're going to continue to invest in more clinical data and product upgrade. So I feel great about this product.Rick Wise Great. Thank you so much.Operator Thank you. Our next question comes from Vijay Kumar from Evercore ISI. Your line is open.Vijay Kumar Hey guys. Congrats on the print this morning and I had one back, Robert, on this base EPS question. I think based on some of the numbers you disclosed, it looks like the base earnings EPS is about $4.10 in fiscal '23, excluding COVID testing. Assuming base EPS grows double-digits, historical Abbott algorithm, we're looking at something like $4.50ish for fiscal '24. The variables here are of endemic COVID testing run rate, what if inflation coming down and capital deployment assumptions, right? So if you could just parse out, is $250 million, $300 million like a right number for endemic COVID testing? And what is your current inflation, total gross inflation that Abbott has taken a hit on versus pre-pandemic? And what part of that inflation is coming down or could there be some pricing offsets in cap deployment?Robert Ford Sure. So I think you've got the numbers kind of in the right direction there, Vijay, if I followed all of that. And I would say, as I said, that the primary driver of that is going to be the base business performance driving that growth.Regarding COVID for 2024, listen, I'm going to need to see a little bit how the testing environment evolves. We brought down the forecast for this year based on what we're seeing. I'd say there is very little public investment, I would say, in testing. So it's mostly now a private market.I think we do very well in that segment with the brand that we've built, not just here in the US, but overseas also. So but it may be -- might be a little bit early to try and forecast what COVID is going to be next year, but I think the number you threw out there of a few hundred million dollars is maybe a good starting point. But again, we're going to have to see how that evolves during the year. Regarding your inflation question, I'm going to ask Bob to address it.Bob Funck Yeah. Vijay, so we saw a lot of inflation, which we talked about on the last few calls, really hitting us last year, and it was probably tuned around $1 billion. We saw some carryover inflation there into this year, but we've essentially been able to offset that through some of the gross margin programs we have across our businesses, which Robert talked on as well as taking some price in some of the areas of the business, again, more the -- with the more consumer facing businesses. So we've really been able to kind of mute that carryover inflation this year, but we still have probably about $1 billion, call it, 240 basis points, 250 basis points worth of headwind currently sitting in our gross margin.Vijay Kumar Understood. And then sorry, Robert, on capital deployment, I think CSI acquisition, people thought, was on the smaller side. How are you thinking about cap deployment? And one on product side. The Libre US number, 50% was a big number. Is there anything from a competitive perspective that's going on? Is Abbott gaining share or is this the underlying market growth?Robert Ford I'll talk about us. I mean I think the 50% growth there is pretty strong. We've been at this rate for a couple of quarters now. I think it's a combination of our product launch and our execution and expansion of the market. So I think the 50% here is like I said I don't know what the other manufacturers are going to -- are seeing, but that 50%, I'd say that's our growth rate, and so I think it's doing very well. Sorry, what was your first question?Vijay Kumar On cap deployment. Cap deployment.Robert Ford Yeah. I mean, I think you guys almost feel like you want to have like some sort of model from us in terms of how we do this. I guess the best model, the only model that we're looking at is what's the best return for our shareholders here. So and what we found is having the -- having this kind of balanced approach where we're committed to a strong and growing dividend.We make the investments in our organic opportunities to drive organic growth and we've been doing those in Med Device, in Diagnostics, in Nutrition. And if there is an opportunity for M&A to able to add to the portfolio, then we'll do that. And we announced the -- our intention to acquire CSI and I think it was -- fit exactly our criteria here, Vijay, which is -- it's a great strategic fit, wanted to build more of a position in the peripheral side.You've been seeing what we've been doing. We acquired a thrombectomy company about a year and a half ago, now looking at atherectomy with CSI. So it's a good strategic fit. They have a strong position in a growth area that we like and we believe that we can add value and felt the deal made sense financially for the company. So that kind of fits into our framework of how we look at M&A and how I've talked about it. So the allocation is balanced and we'll look at what's the best return for our shareholders as we allocate the capital.Vijay Kumar Fantastic. Thanks guys.Operator Thank you. Our next question comes from Joanne Wuensch from Citi. Your line is open.Joanne Wuensch Good morning and nice quarter. A couple of catch up questions. Can you update your guidance and thoughts on interest expense and where you are on share purchases in the quarter and plans for the year? And I'll toss my real question in. EPD, another quarter of double-digit growth, what is driving that? And in your view, how sustainable is that in a potentially recessionary environment? Thanks.Robert Ford Okay. I'll take the EPD question here. Listen, I think that this is a -- we've been doing this for many years here I would say. I think we've carved out this, talked about this nice little space for us in the global pharma market, which is, I'd call, fast growing emerging markets with a branded generic focus. There is a way of how to operate in this. It's not operating the way you would operate with proprietary pharma and it's different from operating in pure generics.And I think that what you're seeing now is really an organization that has kind of figured out the right sweet spot on how to execute on this strategy and you're seeing the results over the last couple of years. We tend to really focus on local for local. We pick the right markets and we develop portfolios that are relevant for those specific markets by having local R&D, local manufacturing.So that's done very well for us. And I think the team has done a really good job at driving profitability. So not just the top line, but also the bottom line. One of the challenges here, Joanne, is obviously FX, but they've actually -- this group have actually driven absolute dollar profit growth in the business. So I think they've figured out how to do this really well, not just with portfolios, but also channels and integrating that. It is a very unique model, and I think the team has -- have done a really good job at understanding it.From a geography perspective, I mean, in my opening comments, a lot of growth in Southeast Asia, a lot of growth in Latin America for us and great growth in India too. As you know, we've got a large business in India there too. So I think it's working very well. And I think it's very sustainable too, given the dynamics of these markets. Regarding your question on interest?Bob Funck Yeah. So, Joanne, in terms of kind of net interest expense for the year, we're forecasting a few hundred million dollars there. And then you had a question on share buybacks. As you know, historically, we do buybacks to offset dilution and so we did some buybacks in the first quarter, again, a few hundred million dollars worth of buybacks.Joanne Wuensch Thank you very much.Scott Leinenweber Operator, we'll take one, go ahead.Operator Thank you. Our next question will come from Danielle Antalffy from UBS. Your line is open.Danielle Antalffy Good morning, guys. Thanks so much for taking the question. Just a question on specifically two components of the Structural Heart business, the first being MitraClip. Robert, just curious about what you're seeing in that market. That was a market that was severely impacted by both COVID mortality and hospital staffing constraints. Just curious about where you think we are in the recovery specifically in that market. You did seem to put up another decent growth quarter this quarter. And then I have one follow-up on Amulet.Robert Ford Sure. I think it was double-digit growth in the quarter. I think what we saw there was continued international momentum and I think that's a great opportunity for us just to be able to expand the technology internationally. We have a new manufacturing site that we invested in that's up and running and I think that will give us the opportunity to be able to expand this more internationally. So I think that's a great growth driver for us.And then recovery in the US. As I said, I think some of the systems have figured out how to manage the staffing shortage. Our teams play an important role in that also. So I think that, listen, I'm cautiously optimistic here that this part of the ramping up of MitraClip has been addressed.From our side, we continue to focus on driving the patient referral funnel. I mean that was probably one of the areas that got shut down that we were starting to build. So I'm starting to see good momentum there on building those patient referral funnels. So --Danielle Antalffy Okay. That's great. And then on Amulet, the question I have there is really about where you think you are in the launch. I mean, that's a product that very high growth market, but let's be honest, you launched, I think, that product during Omicron, right? So just curious about how you would characterize where you are in the launch of Amulet. Thanks so much.Robert Ford Yeah. Listen, it's going well. We've got a nice kind of ramp. I guess I would say I wanted that ramp to be a little bit more vertical. I would say one of the challenges we face there is exactly like you said, it's difficult to launch a product right into the pandemic. We saw that with a couple of products also. But I think that the team has done a really good job here of being thoughtful about how to build a strong and sustainable position in the market. We're not in the entire market.We haven't gone out and launched into all the accounts, but the accounts that we have launched into, Danielle, we're actually seeing roughly about a 25% market share into those accounts. So I think that's the right kind of base to work off from, ensuring that the accounts that we're in, we're starting to see repeat usage, continued usage, expanded usage. And as we start to see more of that then we'll start to ramp up and start to go to new accounts. So I think this is an exciting area for us.Yeah, I would want it to be a little bit more vertical in terms of its launch, but I'm very optimistic about the product, about the team, about the position that we built in. So and we're investing in it, right? We've got our CATALYST trial here that's enrolling pretty well too, comparing Amulet to NOACs. So I think this is a great opportunity, a great area of investment and growth for us.Danielle Antalffy Thank you.Scott Leinenweber Operator, we'll take one more question.Operator Thank you. And our last question will come from Matt Miksic from Barclays. Your line is open.Matt Miksic Hey, thanks so much for squeezing me in. So covered a lot of ground, obviously, out of here. So maybe, Robert, if I could just ask just one follow-up on your comments this morning, which came across, I think, to most folks as noticeably more bullish and encouraged by what you saw in Q1. And maybe just recognizing that investor expectations have also risen a bit throughout Q1 as checks and everything came in during the quarter, but would you describe what you're seeing in the environment as something like a volume recovery or some other companies have used this backlog concept or something that might -- is strong now and may ease whenever -- later in the year? Or is what you're seeing maybe something more general in terms of lifting productivity and volumes that could be more sustainable? Thanks.Robert Ford Yeah. I guess the way to -- the way I'm seeing this, and I've travelled quite a bit during this first quarter and I made the statement in my opening remarks. I sense in talking to systems and talking to consumers, again, not just in the US, but around the world that there is this focus now of, okay, COVID is behind us, but I want to stay healthy, I want to get healthy, and I want to stay there.So as it relates to procedures, what I'm seeing is people say, listen, I've been putting this off not because of COVID, not because there's some sort of backlog, but I've been putting this off for a couple of years. I want to go and address this or on the consumer side of our products, whether it's EPD or Nutrition, we're seeing, again, a lot more focus on, okay, I'm going to spend some of my disposable income on these products, on these health products.So I don't see this as like a backlog aspect here that we're going to work our way through. Maybe there is some areas or geographies that you might have a little bit of that, but we tend to, on the procedure side, we tend to work with the systems and we play a role in preplanning this procedure. So we have a sense of what the funnel is. And I don't see like this oversized funnel over here because of a backlog. What I do see is more funnel just because people are wanting to invest in their health.And on the flip side of that is I think the systems have figured out, whether it's in diagnostics or whether it's in cardio procedures, they figured out how to have to deal with some of these staffing issues that I don't think are -- will ever be back to normal. So I think that what you're seeing are systems obviously addressing some of the shortfalls, but -- not just by hiring, but also using technology, working with companies to figure out how to offset some of that delta in labor shortage.So I think this is very sustainable. And I think you're seeing some of the companies that are reporting, yesterday, I think we saw some companies report talk about growth in procedure trend. So I think it is sustainable. I don't think it's a bolus of backlog, so at least that's how we're seeing it, at least on our products.Matt Miksic That's great. Thanks so much.Robert Ford I'll just wrap up here then. I think like I said in my comments, I think we're off to -- we're definitely off to a very strong start to the year here. Growth in our underlying base business has accelerated, and it's strong, and it's across the board, whether it's the different product groups, platforms or geographies.We're now forecasting at least high single-digit growth in our underlying base business here. And I think this is a pretty unique and differentiated growth profile. Part of it is market conditions improving, but I also think part of it is our new product pipeline that continues to be highly productive.So we're really pleased with how we started off the year. And with that, we'll wrap up, and thank you for joining us.Scott Leinenweber Thank you, operator, and thank you for all of your questions. This now concludes Abbott's conference call. A webcast replay of this call will be available after 11:00 A.M. Central Time today on Abbott's Investor Relations website at abbottinvestor.com. Thank you for joining us.Operator Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.
Abbott Raises Full-Year Outlook Amid Strong Medical Device Sales
Abbott (NYSE:ABT) shares rose nearly 2% intra-day today after the company raised its full-year income guidance, driven by robust medical device sales and strategic product approvals, positioning the company for a strong finish to the year.
Abbott now forecasts annual diluted earnings per share, excluding specific items, to land between $4.64 and $4.70—up from its previous range of $4.61 to $4.71 and edging close to the consensus estimate of $4.66. CEO Robert Ford highlighted the company’s positive momentum, stating that Abbott is on track to reach the higher end of its initial earnings targets for the year, setting the stage for continued growth into next year.
The company projected organic sales growth for 2024 between 9.5% and 10%, excluding its COVID-19 test sales, for which a reliable forecast remains elusive as the virus shifts from a pandemic to an endemic stage. Excluding COVID-related revenues, Abbott recorded an 8.2% increase in third-quarter sales, slightly below the expected 9.3% and a moderation from last year's 13.8% growth rate.
Despite softness in its nutrition and diagnostics segments, Abbott’s medical devices segment saw a significant 11.7% year-on-year revenue jump, totaling $4.75 billion and surpassing projections of $4.68 billion. Demand was especially high for Abbott's continuous glucose monitors, which drove much of the growth in its diabetes care unit and helped offset declines elsewhere, marking a successful quarter for the company’s core device offerings.
Abbott Laboratories' Strong Financial Performance and Market Position
- Abbott Laboratories (NYSE:ABT) reported an EPS of $1.21, surpassing estimates and showing year-over-year growth.
- The company's revenue reached $10.64 billion, driven by strong sales in its medical devices division, particularly glucose-monitoring products.
- Abbott's financial metrics, including a P/E ratio of approximately 37 and a debt-to-equity ratio of 0.38, indicate strong investor confidence and a solid financial foundation.
Abbott Laboratories, trading as NYSE:ABT, is a global healthcare company known for its diverse range of products, including medical devices, diagnostics, and nutritional products. The company competes with other major players in the healthcare sector, such as Johnson & Johnson and Medtronic. Abbott's focus on innovation and quality has helped it maintain a strong market position.
On October 16, 2024, Abbott reported earnings per share (EPS) of $1.21, surpassing the estimated $1.20. This performance marks an improvement from the previous year's EPS of $1.14, as highlighted by Zacks. The company's revenue reached approximately $10.64 billion, exceeding the estimated $10.55 billion, driven by strong sales in its medical-devices division.
Abbott's robust financial performance has led the company to raise its full-year outlook. The strong sales of its medical devices, particularly glucose-monitoring products, have been a significant contributor to this positive outcome. This success has allowed Abbott to slightly increase its annual profit forecast, reflecting confidence in its continued growth.
The company's financial metrics provide further insight into its market position. Abbott's price-to-earnings (P/E) ratio of approximately 37 indicates investor confidence, while a price-to-sales ratio of about 5.06 suggests the market values its sales highly. The enterprise value to sales ratio of 5.25 and enterprise value to operating cash flow ratio of 27.08 highlight the company's valuation and cash flow efficiency.
Abbott maintains a strong financial foundation with a debt-to-equity ratio of 0.38, indicating a low level of debt compared to equity. The current ratio of 1.68 shows that Abbott has a solid ability to cover its short-term liabilities with its short-term assets, ensuring financial stability and operational flexibility.
Abbott Laboratories (NYSE: ABT) Earnings Preview and Financial Health
- Abbott Laboratories is set to release its third-quarter earnings on October 16, 2024, with an expected earnings per share of $1.20 and projected revenue of approximately $10.55 billion.
- The company's growth is significantly driven by its FreeStyle Libre product and the strong performance of its Established Pharmaceuticals Division (EPD) and Neuromodulation segment.
- Abbott maintains a strong financial position with a price-to-earnings (P/E) ratio of 36.59 and a price-to-sales ratio of 5.01, indicating its capacity to continue investing in growth opportunities.
Abbott Laboratories (NYSE: ABT) is a global healthcare company known for its diverse range of products, including medical devices, diagnostics, and nutritional products. The company is a key player in the healthcare industry, competing with other giants like Johnson & Johnson and Medtronic. Abbott's focus on innovation and expansion in international markets has been a significant driver of its growth.
On October 16, 2024, Abbott is set to release its third-quarter earnings, with Wall Street estimating an earnings per share of $1.20 and projected revenue of approximately $10.55 billion. This aligns closely with the company's own projections of $10.6 billion in revenue and $1.20 earnings per share on an adjusted basis. The anticipated mid-single-digit revenue increase is largely attributed to the strong performance of Abbott's FreeStyle Libre, a leading diabetes management product.
Abbott's Established Pharmaceuticals Division (EPD) and Neuromodulation segment are expected to contribute significantly to the company's growth. The Neuromodulation segment, in particular, has seen robust demand for the Eterna rechargeable spinal cord stimulation device in international markets. This growth is crucial as Abbott faces challenging comparisons with the previous year, where all divisions achieved double-digit revenue growth.
The company's Medical Devices and Diagnostics divisions, which account for two-thirds of total sales, are also under the spotlight. The Medical Devices segment is expected to benefit from increased procedure volumes and sustained demand for diabetes products. Abbott's recent FDA clearance for its over-the-counter glucose monitoring devices, Libre Rio and Lingo, is likely to further strengthen its diabetes product offerings.
Financially, Abbott maintains a strong position with a price-to-earnings (P/E) ratio of 36.59 and a price-to-sales ratio of 5.01. The company's debt-to-equity ratio of 0.38 indicates a moderate level of debt, while a current ratio of 1.68 suggests a solid ability to cover short-term liabilities. These metrics reflect Abbott's stable financial health and its capacity to continue investing in growth opportunities.
TD Cowen Reiterates Buy Rating on Abbott Labs Ahead of Q3 Earnings
TD Cowen analysts reaffirmed their Buy rating and maintained a $130 price target on Abbott Labs (NYSE:ABT) stock. The analysts expressed confidence that Abbott's upcoming third-quarter results will likely meet or exceed Wall Street expectations, positioning the company to achieve its full-year guidance.
The analysts pointed to several new product launches, including the recent introduction of Abbott's Lingo CGM sensor in the U.S., as key growth drivers. These developments, combined with the company's core business strength, bolster optimism for Abbott’s outlook, despite potential risks from the ongoing NEC litigation.
Abbott Laboratories (NYSE:ABT): A Promising Investment Opportunity
- Abbott Laboratories has seen a modest gain of approximately 2.51% over the past month, indicating a stable upward trajectory.
- The company boasts a Piotroski score of 9, highlighting its strong financial health and operational efficiency.
- With a target price set at $137.85, ABT presents a compelling investment opportunity with significant growth potential.
Abbott Laboratories (NYSE:ABT) is a global healthcare company that specializes in a broad range of medical devices, diagnostics, branded generic medicines, and nutritional products. Its diverse product portfolio and innovative approach have positioned it as a leader in the healthcare sector, competing with other major players in the industry. The company's recent financial performance and stock market activity have drawn attention from investors looking for growth opportunities.
Over the past month, ABT has seen a modest gain of approximately 2.51%, showcasing its stable upward trajectory in the stock market. This performance is particularly noteworthy considering the slight decline of about 0.29% in the past 10 days. Such fluctuations are common in the stock market and can provide strategic buying opportunities for investors. The recent dip in ABT's stock price might be seen as an attractive entry point for those looking to invest in a company with strong growth prospects.
The significant growth potential of Abbott Laboratories is highlighted by its impressive 20.73% upside based on current analyses. This potential is further supported by its robust Piotroski score of 9, which indicates strong financial health and operational efficiency. A Piotroski score of 9 out of 9 is rare and suggests that ABT is well-equipped to overcome market challenges and seize growth opportunities. This score is a comprehensive measure of the company's financial strength, based on nine criteria that assess profitability, leverage, liquidity, and operating efficiency.
The target price for ABT is set at $137.85, providing investors with a clear goal for short to medium-term gains. This target, combined with the stock's recent performance and fundamental strengths, positions Abbott Laboratories as an attractive investment option. The company's consistent growth and solid financial foundation make it a compelling choice for those looking to diversify their portfolio with a resilient and promising stock.
In summary, despite the slight loss in the past 10 days, Abbott Laboratories' overall monthly gain, coupled with its excellent growth potential and strong Piotroski score, positions it as today's top stock pick. The recent dip in ABT's stock price should be considered a potential entry point for investors, given the stock's promising outlook and the opportunity to buy in at a local minimum before the anticipated rise towards its target price.
Abbott Raises Annual Profit Forecast, But Shares Drop 4% on Weak Diagnostics and Nutrition Segments
Abbott Laboratories (NYSE:ABT) increased its annual profit forecast on Thursday following a second-quarter performance that surpassed Wall Street expectations, driven by double-digit growth in glucose monitor sales and robust demand for heart devices.
Despite this, shares dropped more than 4% today as sales in the diagnostics and nutrition segments fell short of estimates. J.P. Morgan analysts noted that while the medical devices unit showed strength, concerns over the company's liability in infant formula cases persist.
The second quarter saw Abbott's medical devices sales rise by 10.2% to $4.73 billion, surpassing the estimated $4.66 billion. This growth was fueled by increased surgeries post-pandemic and higher demand for continuous glucose monitors like the FreeStyle Libre, whose sales jumped 18% to $1.6 billion. Abbott projects FreeStyle Libre sales to hit $10 billion by 2028.
However, the company's nutrition business, which includes infant and adult formula products, reported sales of $2.15 billion, slightly missing the forecasted $2.16 billion. Diagnostics sales, including COVID-19 tests, declined by 5% to $2.20 billion, against an estimate of $2.21 billion.
Abbott posted an adjusted quarterly profit per share of $1.14, exceeding the $1.10 expected by analysts. The company raised its full-year profit forecast to $4.61 to $4.71 per share, up from the previous range of $4.55 to $4.70.
Goldman Sachs Sets Bullish Price Target for Abbott Laboratories
- David Roman of Goldman Sachs has set a bullish price target of $121 for Abbott Laboratories, indicating a potential upside of approximately 20.12%.
- Abbott Laboratories is anticipated to report earnings per share (EPS) of $1.10, marking a 1.85% improvement from the same quarter last year.
- Wall Street analysts have a favorable outlook on Abbott, with an average brokerage recommendation (ABR) of 1.53, indicating a strong buy sentiment.
David Roman of Goldman Sachs has recently set a bullish price target of $121 for Abbott Laboratories (NYSE:ABT), suggesting a potential upside of approximately 20.12% from its current price of $100.73. This optimistic outlook, as featured on StreetInsider, is based on a comprehensive analysis that underscores the company's strong market position and growth prospects. Abbott Laboratories, a leading name in the healthcare sector, is known for its diversified product portfolio, which spans across diagnostics, medical devices, nutritionals, and branded generic pharmaceuticals. This wide-ranging presence has enabled Abbott to establish a solid footing against competitors, making it a key player in the healthcare industry.
Despite a slight decline in its stock price by 0.27% to close at $103.95, Abbott Laboratories has been navigating through market fluctuations with a keen eye on future growth. This minor dip comes in contrast to the broader market's gains, with the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite experiencing increases. Over the past month, Abbott's shares have seen a 2.46% decrease, slightly underperforming against the Medical sector's 3.27% gain and the S&P 500's 4.03% increase. This performance indicates a cautious market sentiment towards Abbott amidst broader market dynamics.
The upcoming earnings announcement from Abbott is highly anticipated, with expectations set for the company to report earnings per share (EPS) of $1.10, marking a 1.85% improvement from the same quarter last year. Revenue forecasts suggest a 3.78% year-over-year increase, with projections estimating $10.35 billion for the quarter. These figures reflect the company's consistent growth trajectory and its ability to navigate through market challenges. For the full year, earnings are anticipated to be $4.62 per share, highlighting the company's strong financial health and operational efficiency.
Wall Street analysts, including those from Zacks Investment Research, have expressed a favorable outlook on Abbott, with an average brokerage recommendation (ABR) of 1.53, indicating a strong buy sentiment. This positive sentiment is supported by the analysis of 19 brokerage firms, with a significant majority rating the stock as a Strong Buy. This consensus among analysts underscores confidence in Abbott's growth prospects and its ability to deliver value to its shareholders.
Abbott Laboratories' robust financial performance, highlighted by an interest coverage ratio nearing 25 and an AA- credit rating from Standard & Poor's, further solidifies its position as a reliable investment. The company's strong sales growth during the first quarter and its solid base business have attracted increased investor interest. With a market capitalization of roughly $175.23 billion and a trading volume of about 4.96 million shares, Abbott continues to be a significant player in the healthcare industry, offering promising growth and stability to its investors.
