Abbott Laboratories Bull Run Is Far From Over
Abbott Laboratories (NYSE: ABT) has long been a favorite of ours here at MarketBeat. The company is not only well-positioned as a biotech/pharma whose business is anchored in consumer and staple-type products but is also one of the best-managed company’s Wall Street has to offer. Over the years this company has produced growth, spun off a very successful side business (AbbVie NYSE: ABBV), paid a steadily increasing dividend, and maintained a fortress balance sheet. There is really nothing not to like about this stock and the Q4 results prove it.
Abbott Laboratories Beats And Guides Higher
Abbott Laboratories had a great quarter and is expecting an equally strong 2021. The company produced $10.7 billion in net consolidated revenue, up 28.8% from last year, and beat the consensus by 765 basis points. The revenue was driven by gains in most segments although diagnostic stands out. The diagnostics segment grew by 111% versus smaller single-digit gains in the other segments. Diagnostics was in turn driven by gains in COVID-19 testing which contributed $2.4 billion in revenue globally.
Within the COVID-19 testing numbers are sales for both distributed and proprietary products. Of the $2.4 billion, more than $1.9 billion is due to the company’s three rapid-test platforms. In terms of revenue, COVID testing accounted for nearly 25% of the company’s revenue and maybe a problem in future quarters. Eventually, the amount of testing is going to fall off as vaccines make their way through the population and that will cut into the revenue. What investors need to focus on is that revenue growth is going to be forever accelerated from the mid-single-digit pace that was predicted before the pandemic struck.
Moving down the report, the company’s net income grew by 105%, EPS by 103%, and adjusted earnings by 52% and all above target. The $1.20 in GAAP earnings is $0.13 better than expected while the $1.45 in adjusted EPS is a dime better. Looking forward, the company is expecting both revenue and earnings strength to persist in 2021. The new guidance is calling for EPS growth in the range of 35% with adjusted earnings of at least $5.00 versus the $4.44 consensus target.
The Analysts Are Pushing Abbott Higher
The analysts have been bullish on Abbott for a long time but have gotten noticeably more bullish over the last three months. The average rating has shifted from a buy to a strong buy with a consensus price target that continues to lag price action. There were at least 8 major analyst calls after the Q4 results were released with all including a price-target in or upgrade. BTIG upgraded the stock from Neutral to buy and set a $140 price target that matches the Wall Street high. According to BTIG the chance of declining COVID-related sales is offset by other growth avenues that should begin bearing fruit in the coming year.
"We expect shares to continue moving higher as investors shift away from concerns about a steep post-COVID drop-off in Diagnostics revenue and reward [Abbott] for its deep pipeline of high-growth products in Devices and Diagnostics as well as its demonstrated ability to gain leverage and continue to grow EPS at a double-digit annual rate," analyst Marie Thibault writes.
The Technical Outlook: Shares Of Abbott Are Revaluing Higher
Shares of Abbott may not be in a multiple expansion but they are moving higher on a revaluation driven by the analysts. The consensus target is only $122 or about 1% above the current price action compared to the $135 to $140 implied by the most recent analysts’ actions. Looking at the chart it’s easy to see that Abbott is in an uptrend and one that is gaining strength. A move up to the $135 to $140 level looks very likely and maybe the beginning of a much larger move.
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