Abbott Laboratories (ABT) stock dipped Wednesday after the medical giant topped third-quarter profit expectations, but reported lagging pharmaceutical sales and narrowed 2018 earnings guidance. On the stock market today, Abbott stock slid 1% to close at 70.23.
On Tuesday, Abbott stock rose 3.2%, rebounding from its 50-day moving average. That followed a bullish pop for pharmaceutical stocks which jumped 2.4%, reversing from a 5.7% pullback this month.
For the third quarter, the Abbott earnings report said adjusted income was 75 cents per share on $7.66 billion in sales, rising 13.6% and 12.1%, respectively, vs. the year-earlier period. Analysts polled by Zacks Investment Research called for adjusted profit of 74 cents a share on $7.67 billion in sales.
RBC Capital Markets analyst Glenn Novarro says Abbott earnings are on track to hit the high end of its prior 2018 sales guidance after tacking on 7.8% organic growth in the third quarter. But sales in Abbott’s cardiovascular/neuromodulation unit were soft and pharmaceuticals lagged.
“Slower growth in other markets (25% of established pharmaceuticals division revenue) was the reason for the miss,” he said in a note to clients.
Abbott Stock: Diabetes Drives Upside In Devices
Diabetes care drove upside in medical devices Abbott earnings. Medical device sales of $2.82 billion grew 8.4% on a reported basis. Abbott sold $512 million in diabetes-related devices, popping 37.4%.
Cardiovascular/neuromodulation grew 3.6% to $2.3 billion. Novarro had called for $2.31 billion. Sales of heart-failure devices declined 9.9% to $152 million. The biggest drag was in the U.S., where the pitfall was 14.2% year over year.
“Electrophysiology again grew 20% (organically) and had the highest growth rate within C&N (cardiovascular/neuromodulation),” Novarro said. “Structural heart (up 15.4% organically) too had a good quarter.”
But neuromodulation sales disappointed, increasing just 2.3% on a reported basis and 3.1% organically, Novarro said. Neuromodulation devices mask pain by sending electrical signals that quiet down nerve impulses. Medtronic (MDT) and Boston Scientific (BSX) also compete in this arena.
Established Pharmaceuticals Lag
Total nutrition sales grew 4% on a reported basis to $1.84 billion, above Novarro’s estimate for $1.8 billion. Pediatric revenue was robust, rising 6.6% while adult sales increased 0.8%. Organically, the segments grew 8.5% and 3.2%, respectively.
“Abbott noted above-market growth in the U.S. and double-digit growth in Asia and Latin America in pediatric nutrition,” Novarro wrote. “On the adult nutrition side, Abbott mentioned the wind-down of a product line impacted U.S. growth.”
But established pharmaceuticals — which sell outside the U.S. — declined 0.9% on a reported basis to $1.16 billion. Organic growth was 5.9%. Novarro had projected $1.21 billion in sales.
The medical giant also narrowed its adjusted earnings guidance to $2.87-$2.89 per share. Previously, Abbott had guided to $2.85-$2.91 per share. Analysts predicted $2.89 a share. For the fourth quarter, the company sees adjusted profit of 80-82 cents a share, in line with views for 81 cents.
“We believe FX (foreign exchange rates) is having a bigger impact on fourth-quarter EPS,” Novarro said.
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