Abbott Laboratories stock rose 8% Wednesday and was the second biggest gainer on the S&P 500 index, after the diagnostics and medical-device company beat earnings estimates for the first quarter.
As expected, declining sales of COVID tests were a feature in the release and on the company’s earnings call with analysts. Global COVID testing-related sales fell to $ 730 million in the quarter from $ 3.304 billion a year ago.
Still, the company’s overall sales of $ 9.747 billion were ahead of the $ 9.666 billion FactSet consensus. Sales stood at $ 11.895 billion a year ago.
The company posted net income of $ 1.318 billion, or 75 cents a share, down from $ 2.447 billion, or $ 1.37 a share, in the year-earlier period. Adjusted per-share earnings came to $ 1.03, ahead of the 99 cent FactSet consensus.
Abbott ABT, +7.90% is now expecting 2023 adjusted EPS of $ 4.30 to $ 4.50, which wraps around the $ 4.39 FactSet consensus. That’s despite a reduction in COVID test expectations to about 1.5 billion for the year from $ 2.0 billion as recently as January.
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Chief Executive Robert Ford told analysts on the company’s earnings call that the impact of COVID “has rapidly and significantly lessened,” according to a FactSet transcript.
“A much more relevant and important behavioral shift that we’re seeing in healthcare globally has been the increased priority people are putting on getting healthy and staying healthy,” he said.
That has boosted demand for routine diagnostic tests, medical-device procedures and consumer-based health products, he said. “The net result this past quarter was strong, broad-based growth across our portfolio,” he said.
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In the company’s pediatric nutrition business, global sales rose 9.2%, while in the U.S., they grew 36.1%, mostly due to the impact of lower sales in the year-earlier period when the company had to voluntarily recall infant formula products.
“Following a temporary manufacturing stoppage of these products, Abbott subsequently restarted production last year and continues to make good progress recovering market share in this business,” the company said.
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In Abbott’s Diabetes Care segment, sales of FreeStyle Libre, a continuous glucose monitoring system, rose about 50% in the U.S. and were up in the mid-teens internationally to a total of $ 1.3 billion.
Libre gained FDA clearance for connectivity with automated insulin delivery systems during the quarter and Abbott is now working with insulin pump manufacturers to integrate their systems with its Libre 2 and Libre 3 products.
George Congdon, senior analyst at global research firm Third Bridge, said the diabetes news was a highlight.
“Abbott Laboratories recent earnings calls proved that despite declining COVID-19 testing revenues, strong results in other parts of the business, particularly diabetes, will help buoy near term business performance,” he said in comments based on interviews with executives in the sector.
The FDA move will pave the way for Abbott to partner with Insulet’s PODD, +1.53% newly launched Omnipod 5 insulin pump, the current standard of care on the market, said Congdon.
Analysts also cheered the numbers.
“Overall, we believe ABT’s underlying financial profile remains solidly intact on a go-forward basis with sales in the high-single digits and EPS in the double digits with potential upside from M&A.,” said RBC Capital Markets analyst Shagun Singh.
RBC believes Abbott is stronger as it emerges from COVID and expects continue strong execution and new products to boost earnings. Singh reiterated his outperform rating on the stock, the equivalent of buy.
BTIG analysts were equally upbeat.
“We continue to believe Abbott is positioned well in the event of any market pullback or recession, as we think the company’s balance sheet, firepower, and Dividend King status make it a safe haven,” they wrote in a note.
BTIG also rates the stock a buy and said it remains its top large-cap stock pick for 2023.
The stock is now up 2.4% in the year to date, while the S&P 500 SPX, +0.08% has gained 8%.
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