Should You Buy Abbott Laboratories (ABT)?

The earnings season is on the go and couple of pharma players have already announced their quarterly results. Let’s have a look at them.

Abbott Laboratories (NYSE:ABT) reported its quarterly earnings on April 17. The  company posted a revenue of $5.38 billion, short of analysts’ estimates of $5.42 billion and 1.8% higher than the revenue for the same period last year. The EPS was reported to be $0.42, which lies at the upper end of the range of $0.40-$0.42 guided by the company.

The gross margin of 55.8% came in as a surprise as it surpassed the company’s margin guidance approaching 55%. Let’s briefly look at the different segments of the company:

Nutritionals: The 1Q13 comp is the toughest of the year. The segment reported growth of 8.7%, more than the Street’s estimate of 8% revenue growth. However, it is still less than the 10% growth displayed in 4Q12. The following shows its respective segments’ performances for the quarter:

Vascular: A decline of 3% in revenues was estimated on a year over year basis. However, the decline in sales turned out to be 6% for this segment. The company’s US DES (drug eluting stent) business faces a challenging comp in 1Q13, but the recent Xpedition launch in the US helped to drive share gains.

Diagnostics: The segment displayed a growth of 6.4% more than the Street’s estimate of 1Q13 revenue growth of +6%. However, acceleration in the growth rate is expected over the course of the year. US Molecular revenues remained under pressure in 1Q13 due to the unfavorable changes in reimbursement.

Established Product Division (EPD): A revenue growth rate of only 1.3% was witnessed, lower than the expected 2% growth rate. This matches the company’s guidance of low single digits. Moreover, sales growth is expected to accelerate over the course of the year.

For 2013, the Street estimates a revenue of $22.7 billion which will be 4.9% higher from the revenue made last year. The EPS is expected to be $2.01 or 12% higher than the previous year figure.

Points of interest in the earnings call

–  Nutritionals segment is expected to achieve high single digit growth in 2013

– The company announced the acceleration in revenue growth rate in its EPD segment due to rapid growth in the emerging economies.

Obamacare

Another interesting thing to note will be the comments of the company on the recently legalized medical device excise tax. The company’s revenue structure is quite similar to that of Johnson & Johnson (NYSE:JNJ). By this I mean that both have a diversified revenue base and don’t solely rely on medical devices for their revenue. Abbott Laboratories (NYSE:ABT) makes around 7% of its revenue from selling medical devices. Similarly, JNJ Medical Devices & Diagnostics (MD&D) makes up 40% of the overall revenue of the company.