Abbott Stock Ahead of Q4 Earnings Results: Smart Buy or Risky Move?

Core Viewpoint - Abbott Laboratories is expected to report its fourth-quarter fiscal 2024 results on January 22, with projected non-GAAP earnings between $1.31 and$1.37 per share, reflecting a 12.6% growth from the previous year [1][2]. Earnings Estimates - The Zacks Consensus Estimate for Abbott's earnings has remained steady at $1.34 per share over the past 90 days [2]. - The consensus mark for revenues is pegged at$11.02 billion, suggesting a 7.6% growth from the year-ago quarter [4]. Segment Performance Diagnostics - The Diagnostics segment is expected to benefit from high testing demand and the adoption of top-tier systems, with a projected revenue increase of 1.4% year over year [4][6]. - However, a decline in COVID-19 testing revenues is anticipated, continuing a trend from previous quarters [5]. Established Pharmaceuticals (EPD) - Abbott's EPD business is likely to show strong performance driven by a broad product portfolio and favorable demographic trends, with a projected revenue increase of 6.9% year over year [7][9]. - The company has identified biosimilars as a strategic growth area, contributing positively to the fourth-quarter results [8]. Medical Devices - The Medical Devices segment is expected to report an 11.8% year-over-year revenue increase, driven by the Diabetes Care division and new product launches [10][13]. - Key products include the Freestyle Libre sensing technology and the recently launched tricuspid repair device, TriClip [11][12]. Nutrition - The Nutrition division is anticipated to see a 5.8% revenue improvement, with strong sales in pediatric nutrition and market share gains in the infant formula business [13][14]. Stock Performance - Abbott's shares have outperformed the broader industry, declining only 0.4% compared to a 4.1% decline in the industry during the fourth quarter [15]. - The stock has also outperformed the Medical sector's 12.2% decline, while the S&P 500 rose 3.7% in the same period [15]. Valuation - Abbott's stock is considered to have a stretched valuation, with a forward 12-month Price/Earnings ratio of 21.95X, higher than the sector's 21.42X [19]. - Compared to peers, MDT trades at 15.33X and BSX at 35.35X [19]. Investment Rationale - Abbott's diversified business model and strong market position contribute to its consistent performance and growth prospects, making it a compelling stock for investment [20]. - The company's financial strength, characterized by strong cash flow and conservative leverage, enhances its ability to invest in growth opportunities [21].