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Abbott Laboratories

Analysts predict Abbott Laboratories' cost-cutting will add to bottom-line growth

Analysts say Abbott poised for a stronger year

by Kerry Cardoza
Apr 30, 2014


Kerry Cardoza/MEDILL

Abbott Laboratories stock price dipped last fall after an international product recall.

Abbott Laboratories' future looks bright, analysts predict, based on new product launches, expansion in emerging markets, and potential acquisitions.

“Abbott seems likely to be acquisitive post-split,” wrote Danielle Antalffy, analyst at Leerink Partners LLC, in a report. In other words, in the wake of Abbott's spinoff of its patented pharmaceuticals arm, now called AbbVie Inc., the company may be looking towards acquisitions as a way to stimulate its business.

“I like what's on the menu right now,” said CEO Miles White in a recent conference call with analysts. He cautioned that it was too early to forecast any particular acquisitions, although Abbott has the liquidity to make a move. “I think there is plenty of ammo on the balance sheet,” he said.

The company maintains its guidance for full-year 2014 earnings from continuing operations at $1.13 to $1.23 per diluted share, or $2.16 to $2.26 excluding certain items. In 2013 Abbott earned $3.19 billion from continuing operations excluding items, or $2.01 per share, on sales of $21.85 billion.

The consensus estimate of analysts for 2014 earnings from continuing operations excluding items is $2.21 per share.

The majority of analysts surveyed by Bloomberg rate the shares a buy. They predict that Abbott is poised to at least maintain its recent upward operating performance in the coming year. The stock sells around $39, on the higher end of its 52-week range of $32.70 to $40.49, and well above the $32.05 on the first day of trading as a separate company in January 2013. Analysts have a target price of $42.40.

The company is confident about several new products, including a test, recently cleared by the Food and Drug Administration, intended to help doctors diagnose and monitor diabetes, and Absorb, a dissolvable stent-like scaffold that opens blocked vessels to restore blood flow to the heart.

In addition, Abbott is working to expand its overseas markets, launching a new infant formula, and, in the large Japanese market, a new adult nutrition brand. New facilities are slated to open in China and India.

“Abbott's investments in building out its emerging-markets infrastructure should give the firm a head-start in penetrating those geographies,” said Debbie Wang, Morningstar Inc. analyst, in a report.

Wang has a buy on the shares, noting also the company's aggressive cost-cutting. “We think this emphasis on margin improvement should pay off over the next five years,” she stated.

A slew of recent lawsuits has also not affected stock price meaningfully.

In February five men filed a federal lawsuit in Chicago, claiming Abbott hid the dangers of using the testosterone replacement drug AndroGel. On February 3, the day before the suit was filed, the stock dipped to $35.85. It quickly rebounded.

Abbott also agreed to pay the U.S. $5.5 million to settle allegations that it violated the False Claims Act by paying kickbacks to doctors to use its vascular products. The Dec. 27, 2013 announcement made no noticeable change in stock price.