Abbott Laboratories: Earnings Preview

Abbott Laboratories: Earnings Preview
By: Hannah Ishmael
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Abbott Laboratories (ABT) is expected to report earnings for the second quarter of its 2014 fiscal year (2QFY14) on July 16. Here’s a quick roundup of what to expect from the diversified pharmaceutical company’s earnings on Wednesday.

The company had said in its 1QFY14 earnings release call that it expects to register strong sales growth in 2014, with “double-digit ongoing earnings per share growth” to commence from 2QFY14 onward.

Second-quarter earnings are expected to be largely upbeat as the company recovers some of its lost share in the pediatric nutrition market following the precautionary recall of the company’s Gain Advance Stage 3 infant formula in China on news that its New Zealand-based collaborator, Fonterra, had admitted that it supplied bacteria-laced whey powder that could cause botulism.

The second-quarter results may prove to be a pivotal point for the stock, which could start surging in the second half of the year. Analysts estimate the company’s per-share earnings to be 50.8 cents, representing 10.4% YoY growth. The company has beat estimates for seven of the last eight quarters. The Street’s sales projections for Abbott peg second-quarter sales at $5.529 billion. Abbott has failed to meet analysts’ sales projections for seven of the last eight quarters.

The company’s full-year revenues are expected to increase 3.1% on a year-over-year basis to $22.5 billion. Earnings, on the other hand, are expected to increase 10% to $2.21 a share.

Abbott’s stock has been fairly volatile this year, with the share price vacillating between the low-to-mid 30s and early 40s thus far, with much of the contractions in the price due to negative revisions in topline growth estimates. Abbott is reportedly in late-stage talks to sell off its Established products business. The business brings in about 23% of the company's sales, with 100% of sales coming from outside the US. The deal is expected to offer Abbott financial flexibility and improve topline growth; according to Goldman Sachs estimates, going forward the business will see declines as European austerity measures fall to the wayside.

17 of the 27 analysts covering the company rate Abbott stock a Buy. Only one analyst recommends a Sell. Abbott shares are changing hands for $41.30 apiece, and analysts have a price target of $43.06 on the company’s stock, which reflects an upside of 4.2% on the company’s stock price.

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