Abbott Labs Breaks Out Of Six-Month Base In Low Turnover

After forming a base for nearly six months, medical device and pharmaceutical maker Abbott Laboratories NYSE: ABT broke out last week, continuing an uptrend that began following the company’s second-quarter earnings report in July. 

It marked the third consecutive quarter of accelerating earnings and revenue growth.

On Thursday, the stock climbed to $128.85, clearing resistance above its February 12 high of $128.54. It tacked onto those gains in Friday’s session, rallying to a closing price of $128.94. 

Trading volume was muted in both those sessions, although turnover was 28% higher than average on August 31, as the stock rallied $0.43, although much of the intraday trade was to the downside.

Illinois-based Abbott has a multinational presence. With a market cap of $228.59 billion, it’s currently the 28th largest component within the S&P 500, comprising 0.594368% of total index weighting. 

Abbott has been an innovator in the areas of diabetes and cardiovascular treatment, as well as pharmaceuticals. 

In the second quarter, revenue by the business unit was as follows:

• Diagnostics sales increased 62.8% on a reported basis and 57.2% on an organic basis. Global Covid-19 testing-related sales were $1.3 billion in the second quarter.
• Nutrition sales grew 11.9% on a reported basis and 9.5% on an organic basis. Global ales performance was led by double-digit growth in the Adult Nutrition segment.
• Established Pharmaceuticals sales increased 16.4% on a reported basis and 14.5% on an organic basis. Sales performance was led by double-digit growth in several countries, including China, India, Russia, and several countries across Latin America.
• Medical Devices sales increased 51.3% on a reported basis and 45.1% on an organic basis. Compared to pre-pandemic sales in 2019, Medical Devices sales increased 19.2% on a reported basis and 15.6% on an organic basis, led by double-digit growth in Electrophysiology, Heart Failure, Structural Heart and Diabetes Care.

Last week, Abbott published trial data for its Amulet device, which is currently the only approved device for minimally invasive treatment of a cardiac condition called left atrial appendage occlusion, which doesn’t also require blood thinners. 

The study compared Abbott’s Amplatzer Amulet Left Atrial Appendage (LAA) Occluder with Boston Scientific’s Watchman device. 

According to Abbott’s published results, the trial found the Amulet device offered better effectiveness for specific cardiac conditions. 

The diabetes treatment business line was also the subject of a study. Abbott released results in July showing that 50% of Americans with diabetes may be consuming less protein than recommended. That may result in greater physical limitations. 

Abbott is the maker of Glucerna protein shakes, specifically designed to address protein targets for diabetes patients. 

Although the number of mutual funds owning shares declined slightly in the second quarter, buying continues to outpace selling. Abbott’s up/down volume ratio is 1.6, indicating heavier buying over the past 50 days. 

In late August, Polen Focus Growth, an asset manager with a large stake in Abbott Labs, in both separately managed accounts and in a mutual fund, cited its support for Abbott in a letter to shareholders. Abbott was the portfolio’s only decliner in the quarter.

Nonetheless, Polen wrote, “We still expect the company to grow earnings more than 20% this year and continue double-digit earnings growth in the years to come.” 

Polen specifically noted weakness in Covid-19 diagnostic tests. Revenue in the segment dropped faster than expected, due to the availability of vaccines. “We are not surprised by the current reality, but the decline has been more rapid than what management had expected,” Polen said.

Even so, there’s plenty of promise in other categories to sustain levels of growth that Polen and other investors expect. 

The continuation of this breakout remains to be seen, particularly if the broader market turns lower (although it’s yet to show any real signs of doing so). Abbott shares have been trending well above even the short-term 10-day moving average for the past week. 

At this juncture, the stock remains in by range, as it’s currently trading only fractionally above the $128.54 pivot point of its base.