The Value of Making Drugs: Abbott Laboratories (ABT)

Over the next five years, the growth prospects for the two companies appear to be similar to that of the industry overall. In the past year, AbbVie had earnings decreases of 17.83%, even though their revenue growth grew almost 11%. AbbVie is projected to grow 40% in terms of earnings in the next year, but this still comes with the question if this growth is sustainable. Long term estimated growth in EPS is only 5.77%. In the coming year, Abbott Laboratories is expected to have revenue decreases of 42.98%. This is a drastic contrast to the 2% growth seen in the most recent year. Much of this decrease in growth has to do with the fact that a significant portion of Abbott Laboratories revenue is now part of AbbVie. The costs associated with a spinoff (discontinued operations) would also be part of this drastic change. Once these costs are no longer a concern, Abbott Laboratories will likely continue to grow at the pace originally seen by the company. Along with this, the current estimated growth in a long term scope, in terms of EPS is almost 11%. This presents some extremely important opportunities for investors. While AbbVie looks more promising in the short run, the uncertainty associated with the HUMIRA drug creates a very large risk. Unless there is knowledge that a replacement for this massive loss in revenue is a certainty, the future of AbbVie is too risky. Abbott Laboratories should be looked at for investment, and if there is any decline in price, possibly due to an earnings announcement in the near future, it would be a good idea to look into purchasing the stock.

The article The Value of Making Drugs originally appeared on Fool.com and is written by Katherine Wood.

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