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.
Given that Abbott Laboratories (NYSE:ABT) doesn’t rely heavily on sales of medical devices, the topic of Obamacare was hardly touched upon in the earnings call.
Johnson & Johnson (NYSE:JNJ) reported its results on Tuesday. Their management commented on how the newly introduced tax will affect the company’s bottom-line. The management stated that the implementation of this excise tax will lead to a decline of $0.05 in EPS which will be recorded over the next twelve months. This comment will definitely help Abbott Laboratories (NYSE:ABT)’s investors to understand the impact of this tax on the future of the company.
Another growing company that will be affected by this regulation will be Medtronic, Inc. (NYSE:MDT). The global leader in spinal implants has been displaying revenue growth for the last 10 years. The company has also been consistently improving its margins .The company announced in its last earning release in Feb that it had experienced growth in all of its segments (domestic, international and emerging markets), which truly reflects its bright future prospects. The company’s next earnings release is expected on May 21.
Foolish Bottom Line
Right now, the outlook of Abbott Laboratories (NYSE:ABT) looks mixed. Where its Vascular segment is not presenting a good picture, the Nutritionals seem to be the bright spot at the company. Many of the analysts have turned bullish on the stock since its spinoff of AbbVie Inc (NYSE:ABBV), its former research pharmaceutical wing, as this spinoff has helped the company to get rid of the patent-cliff headaches from rivals like Merck & Co., Inc (NYSE:MRK).
Overall, given the mixed outlook for the stock, I suggest investors hold it.
The article Should You Buy Abbott Labs? originally appeared on Fool.com and is written by Zain Abbas.
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