Abbott Laboratories (ABT) on Q4 2021 Results - Earnings Call Transcript
Operator: Good morning and thank you for standing by. Welcome to Abbott's Fourth Quarter 2021 Earnings Conference Call. All participants will be able to listen-only until the question-and-answer portion of this call. This call is being recorded by Abbott. With the exception of any participant's questions asked during the question-and-answer session, the entire call, including the question-and-answer session, is material copyrighted by Abbott. They 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 Acquisition. 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 may be forward-looking for purposes of the Private Securities Litigation Reform Act of 1995, including the expected financial results for 2022. 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 31, 2020. 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. Unless otherwise noted, our commentary on sales growth refers to organic sales growth, which excludes the impact of foreign exchange. 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 have reported another strong quarter and highly successful year for Abbott. For the year, we reported organic sales growth of 23% and ongoing earning per share of $5.21, which reflects more than 40% growth, compared to the prior year and exceeded the original EPS guidance, we set last January. These last couple of years have truly been unique on many levels. The challenge throughout the pandemic has been the sheer breadth of its impacts. And for Abbott, it's reinforced the value of our diversified business model, which is uniquely balanced across multiple dimensions, including our business mix, customer and payer types, innovation cycles across our businesses and geographic footprint. We have always said that our business model allows us more opportunities to win during the good times, makes us more resilient during the tough times, and never has this been put to the test more so than over the past couple of years. It's been tested by a major global pandemic and it's proven to be highly resilient, delivering strong growth and returns for our shareholders. COVID testing has been a big part of this, of course. We delivered a billion tests last year and approximately 300 million in the fourth quarter alone, and continue to play a significant role in the world's response to the pandemic. But just as importantly, we demonstrated Abbott's strength across our company, delivering strong growth across our businesses while continuing to expand our portfolio with innovations that will fuel our success for years to come regardless of the pandemic situation. Turning to our outlook for 2022. As we announced this morning, we forecast ongoing earnings per share of at least $4.70, which reflects nearly 50% growth compared to our pre-pandemic baseline in 2019. We forecast organic sales growth for our base business, excluding COVID tests, in the high single digits, and our guidance includes an initial COVID testing sales forecast of $2.5 billion. We're seeing very strong demand for testing to start the year with the recent emergence of the Omicron variant. And as you know, forecasting COVID testing demand for more than a few months at a time has been challenging. Therefore, our initial forecast compromises sales that we expect to occur in the early part of the year. And we'll update this forecast one quarter at a time over the remainder of the year. I'll provide more details on our 2021 results before turning the call over to Bob. And I'll start with Nutrition, where sales grew nearly 6% in the fourth quarter and over 7.5% for the year. Adult Nutrition delivered 9% growth for the quarter and double-digit growth for the year, led once again by Ensure, our market-leading complete and balanced nutrition brand; and Glucerna, our leading diabetes nutrition brand. In Pediatric Nutrition, U. S. sales growth of more than 10% for the year was led by strong growth of Pedialyte, our oral rehydration brand; and market share gains for Similac, our market-leading infant formula brand. During the past year, we continued to expand our Nutrition portfolio with several new product and line extensions, including the launch of Similac 360 Total Care in the U.S. and continued global expansion of our Pediasure, Glucerna and Ensure brands with line extensions such as plant-based, lower-sugar and high-protein products. Turning to Medical Devices, where continued recovery from the impacts of the pandemic and strong growth in Diabetes Care drove sales growth of 16% in the quarter and nearly 20% for the year. In Diabetes Care, sales growth of nearly 30% for both the fourth quarter and full year was led by FreeStyle Libre, our market-leading continuous glucose monitoring system. Rebased Libre sales grew over 35%, which translates to year-over-year growth of $1 billion to a total of $3.7 billion in 2021. This past year, we continued to strengthen our Medical Device portfolio with several pipeline advancements and launches. In the U.S., expanded Medicare reimbursement coverage for MitraClip will make it possible for more people to benefit from this life-changing technology. We launched NeuroSphere Virtual Clinic, a first-of-its-kind technology that lets patients communicate with physicians and receive new treatment settings remotely. We received U.S. FDA approval for our Amplatzer Amulet heart device, which treats people with atrial fibrillation who are at risk of ischemic stroke. And we received U.S. FDA approval of our Portico heart valve replacement system for people with severe aortic stenosis; and CE Mark for Navitor, our latest-generation transcatheter aortic valve replacement system. Moving to Established Pharmaceuticals or EPD, where sales increased nearly 6% in the fourth quarter and over 10% for the full year. Strong performance was broad-based across several countries, led by India, Russia and China. EPD has performed well throughout the pandemic, fueled by strong execution and a steady flow of new product introductions in our core therapeutic areas. And I'll wrap up with Diagnostics, where COVID testing was a big part of the story but far from all of it. COVID testing sales were $2.3 billion in the fourth quarter with rapid testing platforms, including BinaxNOW in the U.S., Panbio internationally, and ID NOW globally, compromising approximately 90% of those sales. Demand for testing continues to remain strong, and we remain committed to help ensure broad access. Since the start of the pandemic, we've invested significantly to build both U.S. and international manufacturing supply chains, and we're working to expand our capacity further to meet global demand. Excluding COVID testing sales, worldwide Diagnostic sales grew over 8% in the fourth quarter and 13% for the year. We continue to roll out Alinity, our innovative suite of diagnostic instruments, and expand test menus across our platforms. During the year, we placed more than 3,000 Alinity instruments for immunoassay and clinical chemistry testing, with approximately 2/3 of those placements coming from share capture. And in Molecular Diagnostics, excluding COVID testing, sales grew double digits in both U.S. and internationally as we continue the rollout of our Alinity M instrument for molecular testing. So in summary, 2021 was another highly successful year for Abbott. We continue to play a vital role in combating COVID-19 as a result of our massive scale we've built in rapid testing capacity. All four of our major businesses delivered strong performance this past year and are well positioned for continued success going forward. And we continue to strengthen our overall strategic position with a steady cadence of important new products from our pipeline in several attractive growth areas. 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, which excludes the impact of foreign exchange. Turning to our results. Sales for the fourth quarter increased 7.7% on an organic basis, which was led by strong performance across all of our businesses, along with global COVID testing-related sales of $2.3 billion in the quarter. Excluding COVID testing sales, organic sales growth was 10.3% versus the fourth quarter of 2020 and 10.8% compared to our pre-pandemic baseline in the fourth quarter of 2019. Foreign exchange had an unfavorable year-over-year impact of 0.5% on fourth quarter sales, resulting in total reported sales growth of 7.2% in the quarter. Regarding other aspects of the P&L for the quarter, the adjusted gross margin ratio was 57.7% of sales, adjusted R&D investment was 6.3% of sales, and adjusted SG&A expense was 26.2% of sales. Our fourth quarter adjusted tax rate was 16.9%, which reflects an adjustment to align our tax rate for the first three quarters of last year with our revised full year effective tax rate of 15.5%, which is modestly higher than the estimate we provided in October due to a shift in the mix of our business and geographic income. Turning to our outlook for the full year 2022. Today, we issued guidance for the full year adjusted earnings per share of at least $4.70. For the year, we forecast organic sales growth, excluding the impact of COVID testing-related sales, to be in the high single digits. We forecast COVID testing-related sales of approximately $2.5 billion with a significant portion of these sales expected to occur in the early part of the year. We'll update our COVID testing sales forecast one quarter at a time throughout the year. Based on current rates, we would expect exchange to have an unfavorable impact of approximately 2% on our reported sales. We forecast an adjusted gross margin ratio of approximately 58.5% of sales for the year, which reflects our forecasted business mix, underlying gross margin improvement initiatives across our businesses, along with the impact of inflation on certain manufacturing and distribution cost. For the year, we forecast R&D investment of around $2.7 billion and SG&A expense of around $10.8 billion, which reflects investments to support several ongoing and upcoming new product launches and strategic growth initiatives. We forecast net interest expense of around $500 million, non-operating income of around $375 million and a full year adjusted tax rate of approximately 14.5% for the year. Turning to our outlook for the first quarter. We forecast adjusted earnings per share of at least $1.50 and organic sales growth, excluding the impact of COVID testing-related sales, to be in the high single digits. Lastly, at current rates, we would expect exchange to have an unfavorable impact of approximately 3% on our first quarter reported sales. With that, we'll now open the call for questions. Operator: And our first question comes from Larry Biegelsen from Wells Fargo. Your line is open. Larry Biegelsen: Good morning. Thanks for taking the question and congratulations on a really strong finish to a strong year. Robert, can you talk about how you thought about the 2022 guidance? Why is $2.5 billion for COVID testing the right starting point? And how are you thinking about reinvesting the upside from COVID testing implied in the $4.70 EPS guidance? And I have one follow-up. Thank you. Robert Ford: Sure, Larry. I'd say at the beginning of the year, you're coming into the year and you're trying to find the right balance, right? You're trying to find the right balance on your long-term growth opportunities that Abbott has, which I think are pretty unique and balancing that with, I'd say, probably some uncertainty. And I'd say every year, there's a little bit of uncertainty at the beginning of the year, but I'd say this year is probably a little bit more than usual. So you're trying to find that balance, and I'm pretty sure we'll talk about some of the long-term growth opportunities. But if you think about some of the challenges in forecasting right now, there's a lot of dynamics that are existing from a macroeconomic standpoint that are out there that, quite frankly, aren't necessarily unique to Abbott. But they're out there, whether it's the pandemic and the duration of the current surge, potential new waves and how long they will last, staffing shortages that we've seen for the hospital base kind of part of our business; quite frankly, patients' willingness to go in, to do a procedure during the surges. So that's probably one kind of big bucket to look at. Another area, obviously, on the macro side is supply chain and inflation challenges that every company is facing, and obviously, kind of currency headwinds. So I'd say those are all challenges that are facing a lot of medtech companies, companies in health care, and quite frankly, a lot of companies outside of our sector. Probably what's a little bit different for us, another fact to consider in our forecast is just COVID testing and how is that going to play out throughout the rest of the year given the magnitude of what the testing could look like between it completely going away or it staying or increasing at this level. So factoring all those kind of elements over here, I think this was the right starting point for us just to start off like that. And I think this initial full year guidance is contemplating not only some of those challenges, but also contemplating on the flip side, a very strong underlying kind of Abbott base business. As I said in my comments, high single-digit growth. So, there are definitely acceleration in a lot of our portfolio versus where we were pre-pandemic. We've got investment in this guidance to be able to support not only all of our launches that we engaged in towards the end of last year, beginning of this year, we've got launches and opportunities. And that's all been contemplated and fully funded. And the initial COVID testing forecast of 2.5, I don't expect COVID to simply go to zero starting in the second quarter. But the challenge of forecasting, the magnitude, I felt is the right way to -- and quite frankly, I talked about this in October, we will be updating it as we go along. We've got a -- we've built a lot of capacity. You've seen that over this last 1.5 years, especially in rapid testing. So we have that capacity, and we'll be updating it. So if we had typically done our $0.10 range guide here, Larry, our consensus, we would have been right in the middle of where you guys are at. But I didn't want to cap the upside, which is why we're at the least $4.70. So if I kind of sum it up, I look at our guidance now and I say, Okay. We've contemplated as much as we can of some of the challenges that a lot of companies are facing, whether it's supply chain, duration of pandemic, medical device procedures, et cetera. I've fully funded our growth platforms that we're very excited about. And there's potential for the upside of more COVID testing because I don't think it goes away, which would then fall through at a good click and provide that upside. So I think that's probably the best way to summarize. It's derisked, fully funded for long-term growth opportunities, and we've got potential upside as we go into the remainder of the year. Larry Biegelsen: That's super helpful. Robert, just for my follow-up, Libre had another remarkable year. How are you thinking about Libre growth in 2022? And what are the drivers of that growth this year? Thank for taking the question. Robert Ford: Sure. Well, yes, I mean, you saw it. It continues to grow at a very strong rate and a very large base. 35 -- over 35% this year, 4 million users now. We've initiated geographic expansion of Libre 3, and that will start in the next couple of weeks. Moving out of Germany into U.K. and France, those are probably kind of key markets that we're expanding over the next couple of weeks. And if I think about 2022, Larry, I mean, I'm looking at here strong double-digit growth. We've been growing about $1 billion of incremental sales per year, and I expect that growth to be at least in that range. So that probably translates into a 25% growth. I think the biggest driver for us is, quite frankly, not just this year but as we look forward, it's still very underpenetrated, right? I'm talking about being a leader in terms of patients with 4 million users where we've talked about numbers between 60 million, 70 million, 80 million benefiting from continuous glucose monitoring and sensor-based monitoring. So I'd say biggest opportunities we've got continue to be international. The CGM penetration internationally is still much lower than in the U. S., and then moving into more aggressively into patient segments that historically have been underpenetrated. You kind of look at the type 2s on single injection therapy. So we've got great opportunity there. U.S., I would say, is another good opportunity for us. We had very good year this year, close to like 16% growth. I think that's the number. Now over 1 million users, we've made the investments that we need to make last year in terms of sales force and advertising, and that's paying dividends. In terms of new users, we continue to have a high share of new user growth. So as you combine what we're doing internationally, expansion of Libre 3, continued growth in the U.S., expanding into a pretty underpenetrated population of type 2s, and I think we've still got -- like I've kind of said, still in the early innings of the Libre story here. Operator: Thank you. Our next question comes from Robbie Marcus from JPMorgan. Your line is open. Robbie Marcus: Great and I'll also add my congratulations on a nice quarter. Two for me. I'll ask them both upfront. First question, maybe you could spend a minute on cadence throughout the year. First quarter has a lot more COVID testing sales than we had thought, but also implies somewhat of a different cadence than we've been thinking. So just top and bottom line, what are the impacts there? How is inflation FX hitting throughout? And then second question is probably tied into it. If you could just touch on what you're seeing in current device and procedure trends as we sit here today and how you're thinking about the evolution of that over the course of '22. Robert Ford: Well, your first question has got multiple sub-questions there, Robbie. So let me take the first one, and then I'll go back -- so I can take the second one, and then I'll go back to your first one because it does contemplate some of the challenges on inflation that might be worthwhile spending some time just talk a little bit about also. But in terms of demand dynamics, especially in the more hospital-based business here, Robbie, we saw a real nice trajectory recovery in the beginning of Q4. We were -- and I always like to compare versus 2019, at least for 2021, to avoid some of the comp pieces. So we were improving our growth rates in our probably more cardio-like businesses, let's use that as a proxy, to be in that kind of 3% to 4% range and improving as the quarters progressed. And Q4 was looking like, again, a continuation of that progression until probably December, where we saw a pretty big drop because of Omicron in most device -- of our device businesses. Probably the only two that we didn't see that drop was Heart Failure. That was probably up in the mid-20s in December versus 2019; and obviously, Libre, which was up probably like in the 70s percent versus 2019. So we did have an impact in these parts of the business, again as -- predominantly driven by Omicron impact of not only staffing, I'd say, but also even just patients basically postponing a little bit and not wanting to go into a hospital. And I think that's continued a little bit here into January. I'd say geographically, seeing a little bit more of that impact in the U.S. compared to other geographies, at least for us. Europe and Asia have held up a little bit better than the U.S. And then we've contemplated as best as we can what that recovery curve is going to look like. We'll see some pressure on that, I'd say, probably January, February going into March. We expect it to get better, and then Q2 will be better. And if you look at the second half of this year, we expect for these businesses to be more at their normal run rate. So I think -- I'd say that's what we're seeing, and that's kind of how we're forecasting the rest of the year. Actually, I was pretty pleased that some of the new product launches that we had during the quarter -- we're always cautious about, okay, do we launch the product during -- in this environment? And they did pretty well, both in Europe and in the U.S., too. So I think that speaks well about the need for the products and the technologies and the innovation. So the consumer side -- the consumer-facing part of our business, I mentioned Libre, but you saw it in Nutrition and EPD. They've done pretty well, the pandemic. They did pretty well in Q4, so they didn't necessarily see the impact of Omicron to those businesses like we didn't see it in Delta either. So we expect those businesses to be pretty resilient. And the key driver there, as I talked a little bit about Libre, is just kind of innovation. On your first question regarding cadence, I mean part of it is this combination that I said: recovering device and core testing procedures that we see going into Q2 and into Q3 and Q4. And then as we have more let's say, call it, confidence in precision regarding our COVID testing, we'll see that kind of flow through and then we'll be able to update you. I think when we're here in April, we'll have a better sense of what Q2 is going to look like, not only for the U.S. but also internationally. And as I said, having that ability to then kind of update the forecast with that COVID number, we'll let it flow through. So I think you also had a question about inflation. I mean that is another area that we're working on and focused on and probably ask Bob to give you some color on that. Bob Funck: Okay. Yes. And Robbie, you actually kind of asked about currency and inflation. I'll cover currency first. I mean we saw the U.S. dollar kind of strengthen since the middle of last year, in particular over the last few months. And so as I said in my opening remarks, at current rates, that's about a 2% headwind on the top line for the year. We're going to see that -- a greater impact in the first quarter, around 3% and kind of and in the second quarter. And it'll get -- the impact will be a little bit less severe as we kind of go through the course of the year into the back half of the year. In terms of inflation, inflation and supply chain challenges are really kind of linked together as supply chains have not been able to catch up to the strong demand that's out there. And so, we're seeing some impacts here, certainly not unique to us or our industry. And we're seeing those impacts across transportation cost, manufacturing inputs, commodities, et cetera. From a pricing standpoint, we have the flexibility to adjust price a bit in some areas of the business, and we're doing so. That's really more in the consumer-facing businesses like Nutrition. In other areas of the business, that flexibility doesn't exist. So I'd say, in aggregate, kind of across those headwinds, we're seeing impacts on gross margin of roughly $0.5 billion, and that's contemplated in our guidance. And I think as supply chains start to normalize over time, we would expect to see improving cost in some areas. For example, in commodities for Nutrition, those costs have kind of moved up and down historically over time. But currently, our kind of outlook doesn't assume any significant changes kind of versus the current dynamics that we're seeing in the market. Operator: Thank you. Our next question comes from Vijay Kumar from Evercore ISI. Your line is open. Vijay Kumar: Thanks for taking my question, and good morning, Robert. I have two questions. Maybe my first one was on the new product side. Robert, you made some comments on perhaps a consumer kind of product at CES at Lingo. I'm just curious, how do you see the opportunity here. Maybe it's slightly different perhaps from our perspective. But for Abbott, I mean you guys have played in consumer markets. How big is this opportunity? Perhaps some sense for when U.S. launch timing could be. And should we expect more analytes, right? I think you guys had four analytes at CES, but I'm curious, is there -- are there other products expected to come down the pipeline? Robert Ford: Sure, Vijay. So we made a decision to put a stake in the ground here and start talking about what we've always believed to be another opportunity, a sizable opportunity for Abbott, and that was really using the Libre platform that we had developed to look into other analytes, other areas. I talked about this recently, and quite frankly, we've talked about it several years ago also. And you referenced some of the analytes that we have been working on: ketones, lactate alcohol, glucose for not -- people with non-diabetes. And those are big opportunities. As I've said, the model is a little bit different. It is probably a much larger TAM in terms of people, but the usage of the sensors is probably more intermittent than you would kind of get on a person, for example, with diabetes today, where we're very clear whether you're a type 1 on a pump or a type 1 injector or a type 2, like we know through the data we've covered here in terms of the usage patterns. So the usage pattern a little bit different, but the sample size is significant. If you think about like a keto sensor and the opportunity to be able to provide real-time feedback for somebody who's trying to manage their keto diet, I think there's a large amount of people, large consumer pool that, whether it's more disciplined keto diets or kind of more on an on-off basis, there's a very large amount of people. And we'll have to just think about how to market it a little bit differently, and our go-to-market strategy will be a little bit differently. But I'd say -- we've always seen this as a big opportunity. And we funded it, and we have a separate team that is obviously leveraging the platform, but they're managed differently. They have a completely different organizational structure, and they're just focused on developing not only the technical side of the analytes but obviously doing all the market development work. So we're really, really in the early inning stages here, but I think the numbers could be pretty significant and pretty large. And why not over a good period of time, maybe it's even bigger than diabetes once you line these up. The first phase of analytes, we announced at CES that this is our intention, that we were designing these. Timing, we expect to launch our first products outside of the United States towards the second half of this year. In the United States, we'll obviously be having the conversations with the agency in terms of how that regulatory path is going to shape up, probably a little bit too early right now to talk about that. But we're very excited about because we've seen this opportunity many, many years back and made the moves. On your question about other analytes, yes, I would say Part 1 -- or Phase 1, I would say, is what I would call these more consumer-facing, more consumer-driven opportunities. But we are looking at other analytes that we probably have, I would say, more of a medical clinical application, whether it's in the hospital or for discharges, et cetera. So, there is opportunity there that we're also working on. So I think it's very large, and we're just in the beginning right now in terms of market creation. Vijay Kumar: That's helpful, Robert. And maybe my second question in the balance sheet. I think you guys probably have over $40 billion of capacity right now conservatively with valuations coming down. What kind of opportunities do you see? And one of the things that always drives me as Abbott is very large in diagnostics, number one, number two in most of your end markets. If you look at diagnostics, liquid biopsy, cancer screening diagnostics, is -- that's a massive opportunity, but I don't see Abbott having a stake in the ground in that area. Is that an area that would interest Abbott? Robert Ford: Well, add to that specifically, I'm not going to necessarily show all of my cards here. But I guess what I will say regarding the M&A question here is, yes, there's -- there seems to be some dislocation now. And I think this could make sense. If there's anything out there that looks strategic for us and that makes financial sense, then yes, we'll be -- we've got plenty of capacity, as you said. We've generated a lot of strong cash flow, and quite frankly, it's been a meaningful step-up in that cash flow over the last kind of 1.5 years or so. So yes, strategically, financial fits, as I've always said. We're in a great position now to be able to look at that. Devices and diagnostics, I will say, are the areas that we're looking at more carefully. Scott's team is always looking at everything, but he's got more special lens here in devices and diagnostics. The areas that you referenced are areas that are in the list of things that we would be interested in looking at. Tuck-in and medium-sized deals probably are more likely, if -- again, if those situations present themselves. But again, we're always looking at everything. So I would say, yes, nothing has changed regarding what I've said about M&A, if it's strategic and it makes financial sense and we can deliver value for our shareholders. We are now in a great position as a result of all the efforts that we've had, quite frankly, cash flow conversion. And now with kind of COVID cash, that also helps. Operator: Thank you. Our next question comes from Josh Jennings from Cowen. Your line is open. Josh Jennings: Good morning gentlemen. Thanks for taking the question. Rob, just first, wanted to ask a question on 2022 guidance. And understand you don't want to put the top end of the range there and cap the upside. Clearly, there's a potential upside with the increased COVID testing outside of that $2.5 billion revenue stream that you're expecting in the early part of the year. But just in a scenario where COVID testing does fall off in that guidance for the revenue from that franchise turns into reality, can you just refresh us on some of the other levers you have that you can pull to drive EPS growth? I think last year, in June when COVID testing fell off, your team talked about share repurchase, accretive M&A, some cost-cutting reductions. But just wanted to get a refresh there and see if you could help us think through those levers. And then second question is just on the diabetes franchise. And clearly, Libre has a long runway. You're looking -- I believe you just talked about in one of your answers about the consumer opportunity. But how should we be thinking about the diabetes franchise and Abbott's desire to kind of leverage the positioning there with other products, either insulin delivery devices or other portfolio adds as we move into 2022 and beyond? Thanks for taking the questions. Robert Ford: Sure. On your first one, I mean, like I said, we derisked, we fully funded, and we've got the potential upside for the COVID testing. If COVID testing in that scenario, which I think is highly unlikely, kind of falls off, then we'll have to obviously look at kind of the investments we're making and kind of make the adjustments that we have to make, especially as we start to move into 2023. I don't think that is the case. I think that COVID testing is going to be still around. I think Omicron has catalyzed a pretty significant shift in global rapid testing and screening. And the question here is just going to be how does it evolve over the next kind of 9 months, 12 months here? So -- but that being said, to your question on that scenario, you'd have to make adjustments. As I've said, we would. But right now, I'm managing -- we're managing the enterprise as a whole, and we obviously got profits that are coming from COVID that we're reinvesting into the business. If that turns out to not be the case this year then, like I said, we're fully funded on our growth platforms. And then we'd have to kind of make adjustments or look at that investment level as we go into 2023, lot of flexibility here also. Last year, we bought -- I think it was about $2 billion in 2021. And I'd anticipate being active in the market again this year since we do have that capacity. So -- and your second question, I think, was on diabetes, right, and growth opportunities. Is that -- could you just... Josh Jennings: Sorry. Absolutely. Just thinking about anything you can share just in terms of internal development programs outside of advancing Libre in diabetes and on the consumer channel on the sensing side. Any other products within the diabetes device realm that you could add to the portfolio? We should be thinking about the diabetes franchise, just sticking with the playbook that you have that's been so successful over the last number of years and has a long runway. Robert Ford: Got it. Got it. So listen, yes, we're in the beginning here. There's still a lot of opportunities, still a lot of under penetration, whether it's internationally or type 2s. As I've said, key aspect here is to ensure your pipeline is relevant and is advancing. We've launched Libre 3 in Europe, and we'll be expanding that launch now globally. I expect to be able to bring Libre 3 here into the U.S. I won't necessarily get into the specifics, but I figured you guys would eventually ask this. We have filed Libre 3 here in the U.S. as an iCGM to the FDA last year. I won't get into specifics about timing there, but it's the -- review process happens in the same agency that reviews diagnostic tests. So as you can imagine, there's a lot of busy work going on with that area of the agency. So we've obviously seen our data that we've submitted to the agency. We've obviously seen now data from a competitive system. And I'd say we're feeling pretty good about where we stand. So I think that's a key component there is to expand the portfolio. I've talked about Libre 4, not necessarily what exactly is that, but we do have that as an active program. Connecting to insulin delivery systems is also part of that strategy. And we've got active programs with all pump suppliers and pen delivery systems also to be able to connect Libre onto that. So, I think we'll stay focused on making the best sensor, sticking to our strategy of consumer-friendly, showing outcomes, price for access and affordability and continue to innovate with our sensor platform and then look at opportunities to use those sensors to not only expand into other platforms, but also to connect to other devices. Operator: Thank you. Our next question comes from Joanne Lunch from Citibank. Your line is open. Joanne Wuensch: Good morning and thank you for taking the question. I have a big picture one and a specific one. Big picture, one of the themes of your keynote address at CES was the marriage of tech in medtech. And I'm curious if you could highlight how you sort of take that lens in terms of your product pipeline. And then my specific question has to do with your Structural Heart franchise. Portico is out in the market, Amulet is out in the market, and I would love just a little bit of an update on how those products are doing? Thanks. Robert Ford: Sure. So yes, I've talked about this convergence. And quite frankly, we've seen this convergence occurring probably when we are doing the St. Jude acquisition and integration. And we started to set a lot of our portfolios to be able to connect to whether it's consumer electronics or cloud or other elements like that to ultimately be able to empower the consumer and just provide better solutions to ultimately improve outcomes. So I think you saw the device portfolio has been going down that path for quite some time now as very pleasantly -- very pleasant to see that start to look not only in the Cardiovascular side, also on the Neuromodulation side. As I said in my opening comments on our virtual clinic, I think that's got an opportunity to change the business model of that business, and at the same time, better outcomes for not only DBS but also spinal cord stimulation, too. So you've seen that in devices. We then started to see Diagnostics, and you saw over that thinking. As we developed Binax, we wanted to make sure that we were kind of integrating not just our expertise in developing an accurate test to be able to detect COVID, but also integrate it into an app where you can kind of have your pass and your phone, et cetera, and working with partners to be able to kind of do that. So I think you're seeing it across all of the portfolio. In our pharma business, we're using digital tools to be able to ensure that patients are taking their medications. So that's pretty, I'd say, strategic elements going across all of our businesses and how we're thinking about it. So, it's not -- I wouldn't say it's just one part of the portfolio, but I think it's a convergence that is happening, and we want to be leaders in that convergence across all of our portfolio. Regarding your question on Structural Heart. So, I think you mentioned Portico and Amulet. Listen, Amulet, we received approval in Q3 last year, moved quickly to launch. I'd say initial feedback has been very strong, especially in the areas of superior closure rates, the need to be able to need to be able to leave the hospital without blood thinners. And also, we've heard a lot of broader sizes to better fit more anatomies and give them more of that flexibility. So that's done very well. As part of the launch, we wanted to make sure that we had good proctor and good peer-to-peer proctoring. So obviously, that became a little bit of a challenge in November and December after Thanksgiving and into December. But I think despite all of that, I think we've done pretty well. I think we did about 500 procedures last year, mostly happened -- mostly in Q4. And if you look at what we did in December, that would put us at about a 10% market share, which is -- which I think is pretty good. Obviously, we're not satisfied with that, given what we know we can do and what we've done in Europe. But I think it's very much aligned to where we wanted to be regarding the end of the year and as we enter into 2022. So I think that's going very well. Portico, we're -- as I've said, this is an important area for Structural Heart. We know that there are two entrenched competitors in there. We think we've got a great technology also, and we're going about it very systematically, very methodically to build our position. We launched our Generation 2 product in Europe, our Navitor product. And again, that's received great feedback also, and there's a pretty competitive clinical profile here for high-risk surgery patients. So, we're making the investments that we know we need to make to be able to expand our position here. So, I feel good about our Structural Heart portfolio. I've talked about how this is big opportunity for us. We've made the investments, and I think we're in a great position as we go into 2022. Operator: Thank you. Our next question comes from Matt Taylor from UBS. Your line is open. Matt Taylor: Good morning. Thank for taking the question. So I just had two margin questions. I wanted to ask the first one, I guess, I'll frame it as, if we take the 1.50 from Q1 that implies about $1.06 to $1.07 for the remaining three quarters of the year. So is that how we should view your base business earnings power? Or are you still spending more through the year from some of the COVID testing profits or being conservative? Would love just any additional color on the base business earnings power ex-testing? Bob Funck: Yes, Matt, I'll take that. This is Bob. So we don't really think about earnings or at the bottom line base versus COVID. We manage we manage the whole company. Obviously, the first quarter is benefiting from the majority of the COVID sales that we've got forecasted at this point in time, kind of our starting point. But we funded our growth throughout the rest of the quarter. So what you have is COVID testing, initial COVID testing sales in that first quarter, but our investments throughout the entire year. And so, as we update our COVID testing each quarter, kind of as Robert talked about, that will fall through, certainly at a higher level than our overall margin profile. Robert Ford: I'll just add on to that, Matt, we absolutely expect there to be COVID testing after the first quarter. The question is at what level. And as I said in the beginning, to be able to kind of forecast a full year out like that, given the magnitude of how this can shift, it's just prudent to do it a quarter at a time. So when we're here in April, we'll have a better sense of what Q2 is going to look like in terms of COVID testing, and we'll be able to kind of update you there. Okay? Matt Taylor: Got you. Can I just one follow-up on -- so on gross margin, you mentioned that there was about $500 million headwind from inflation supply chain. And so, I guess if we add that back in, you're getting to gross margins closer to 60%. Ex that, I was just wondering, if you could talk about expectations for gross margins going forward longer term if things normalize. And if you could kind of see those levels in 2023, if things improve or just pluses and minuses on gross margins longer term? Bob Funck: Well, I think the add back gets you a little bit below that, but the way we think about gross margin every year is looking for ways to expand that. Every one of our businesses has dedicated teams focused on gross margin initiatives. And you're seeing some of that benefit actually in our 2022 forecast helping to offset the impact of the inflation that we're seeing. We continue those programs that are not a one-year program. We do them every year, and we'll continue to do those into next year. The other thing we're seeing is a benefit of kind of the business mix. So as medical devices and routine diagnostic testing recovers, that benefits our overall gross margin for the business. Obviously, Robert talked about a lot of the opportunity. Some of the opportunities is even more that we have to drive growth in our Medical Device business as well as in Diagnostics. And as we grow those businesses, that will have a positive impact overall on our gross margin profile. Robert Ford: Okay. Let me wrap up here then. Thanks Bob. Listen, I'll finish by saying a little bit how I started. I acknowledge that there's a lot of uncertainties in the macro environment right now and the challenges that, that creates in terms of forecasting for investors, at least in the short term: pandemic, how long will it last, phases, transition to endemic, recovery curves of procedures. I get some of the challenges of that forecast. But if I look at the market here at the start of the year and look at healthcare sector, specifically medtech and diagnostics, definitely been disproportionately hit by some of those uncertainties, and I think if you take a step back, I think it's important to remind ourselves, the -- that health care still remains a very, very important need and a great long-term growth area because I think none of the long-term market fundamentals have changed in the pandemic. If anything, some of them have gotten even better and accelerated. So I think the demographic trends are still very favorable. And procedures and routine testing, they're going to come back, whether it's a month, two months, et cetera. It's just difficult to predict with that perfect degree of precision, but they'll come back. And if you look at the innovation pipelines across the entire industry, they have never been stronger. And within that context, I think Abbott's pretty uniquely positioned here. We're in great markets, leading positions in several large, fast-growing segments: diabetes; devices; diagnostics, including COVID testing; nutrition; emerging market pharma. We have strong positions, brands, franchises across all of these. So -- and to one of the questions, I think we're leading in the digital transformation that's going to be more patient-centric care, whether it's with biowearables, whether it's connected devices, remote monitoring, et cetera. And then you layer that diversification that I talked about in my opening comments, which I think is very unique. It maximizes our growth opportunities, and it does provide a natural hedge to some of these macro environment impacts that we're going to see from time to time. And that diversity is not just on the business mix, but customers, payer types, obviously, geographic footprint and a very strong and resilient supply chain. So you translate all that into real strong, sustainable, strategic financial health, whether it's growing revenues, cash flows, dividends, we've got a rock-solid balance sheet. I talked about the opportunities that we have with it. So I think we're in a really good positioned strategically, financially, and I'm excited about all the growth opportunities that lie ahead of us. So with that, I'll wrap it up and I'll thank everybody for joining us today. 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 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 participating, and 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.
