The company’s generic drug segment should also help push emerging market sales. Abbott markets generic pharmaceuticals outside the U.S. only, and while the division isn’t growth-oriented — sales actually fell around 2% for the quarter — it provides an entry for the company to push into lucrative new markets such as India, where generics make up the large majority of the country’s retail market. The company will face tougher competition in this industry, however: Firms such as India-based Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY)’s have also pushed hard into emerging markets lately, and Dr. Reddy’s Laboratories Limited (ADR) (NYSE:RDY)’s in particular should benefit from its being headquartered in one of the industry’s top locales.
Medical device sales are struggling
Abbott will have to hope that emerging market push works, since some of its other divisions – medical devices, in particular – aren’t picking up the growth investors want to see.
Medical device revenue fell more than 4% for the quarter, a casualty of the pricing pressure hitting the entire industry. Johnson & Johnson (NYSE:JNJ) felt a similar blow to its medical device sales in its quarterly report released on Tuesday: While Abbott’s diversified health care rival grew device revenue by more than 10% overall, sales would have fallen if not for the company’s acquisition of Synthes last year.
Abbott Laboratories (NYSE:ABT) does have some promising products in the medical device sector, so all isn’t lost in this declining segment. The company still rules the drug-eluting stent industry with its Xience stent, a product that sold around $1.6 billion last year. Abbott also has its revolutionary new Absorb bioresorbable stent in clinical trials, and should that make it to market, the company will be well-positioned to continue its dominance in the industry in the future.
Still, with sales falling and the medical device industry being hit from all sides with budget and price cuts, don’t expect this division to turn into a growth story any time soon.
A healthy first quarter for Abbott
Despite the fall of medical device revenue, Abbott’s still looking good in its first reported quarter without its former pharmaceutical branch. Nutritional sales have picked up the slack and taken over the reins as Abbott’s growth story, while the company’s emerging markets push has positioned it as a major player in multiple industries in fast-growing economies such as China and India. For now, Abbott’s new life is off to a good start.
The article 3 Things You Need to Know in the Wake of Abbott’s Earnings originally appeared on Fool.com is written by Dan Carroll.
Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends H.J. Heinz Company and Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson.
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