Shares of Abbott Laboratories fell Thursday after the diversified health-care company delivered a solid second quarter but left investors disappointed with forward guidance. Revenue in the three months ended June 30 rose 7.4% to $11.14 billion, outpacing the $11.07 billion consensus estimate, according to estimates compiled by LSEG. Organic sales , excluding Covid testing results, rose 7.5%, beating the 7.2% estimate, according to FactSet. Adjusted earnings per share (EPS) increased 10.5% on an annual basis to $1.26, edging out expectations by a penny, LSEG data showed. Why we own it Abbott is a high-quality medtech company. The stock has dealt with various overhangs since we’ve owned it, such as litigation concerns tied to its specialized infant formula; falling Covid testing sales; and concerns that GLP-1 adoption will disrupt its continuous glucose monitor business. However, Abbott’s organic sales growth continues to shine. Competitors : Dexcom , Boston Scientific and Edwards Lifesciences Most recent buy : May 29, 2024 Initiated : Jan. 29, 2024 Bottom line Abbott’s reported Q2 results were largely positive, with segment beats in Medical Devices and Established Pharmaceutical sales but misses in Diagnostics and Nutrition. Nonetheless, Abbott’s failure to increase its full-year earnings guidance, along with a third-quarter earnings guide that came in a bit below consensus estimates, sent the stock down 8%. As much as we would like to defend Abbott, which has historically been a fantastic operator, we can’t do so this time around. We like the company long-term as it does make best-in-class, lifesaving products that provide a level of resiliency to sales. However, we don’t see any reason to step in to buy more shares, even at these lower levels, given the poor guidance for both the current quarter and the full year, along with sluggish Diagnostics sales in China. ABT YTD mountain Abbott Laboratories YTD Instead, we think the prudent move is to wait until Jim Cramer has a chance to speak with CEO Robert Ford on Thursday’s edition of “Mad Money” in order to better understand the issues pressuring management’s outlook and when things may be expected to improve. As a result, we’re maintaining our 2 rating and $145-per-share price target. Guidance Management tightened their full year EPS around the $5.15 midpoint, now forecasting a range of $5.10 to $5.20 versus the wider $5.05 to $5.25 range previously provided. While the midpoint was unchanged, investors were looking for a slight increase, with estimates coming into the print sitting at $5.16, according to LSEG. The team shaved their full-year profitability outlook, now targeting an adjusted operating margin of 23.5%, the low end of the previously provided 23.5% to 24% range. Excluding Covid testing sales, the team expects to realize full-year organic sales growth of 7.5% to 8%; or 6% to 7% when including testing-related sales. For the current third quarter, management targeted adjusted EPS in the…
Read More: It’s all about the guidance