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Abbott Laboratories’ Financial Performance in 2014

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Financial performance

As we discussed earlier, the nutritional products segment contributes to over 34% of the total revenue for Abbott Laboratories (ABT). Diagnostics products, established pharmaceuticals, and vascular franchise contribute ~23.30%, ~15.40%, and ~14.70%, respectively.

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Revenue

Abbott’s net revenue rose by over 3% to $20.2 billion in 2014—compared to $19.6 billion in 2013. The net revenue was ~$19.05 billion in 2012. The rise was mainly due to the increase in the sales of established products, followed by a rise in the sales of nutritional and diagnostic products. The sales were partially offset by falling sales of vascular products and other products.

Costs

Overall, the gross profit margin rose in 2014 to 54.50%—from 53.20% in 2013 and 53.30% in 2012. Also, the operating profit margin improved by 2% in 2014 to ~12.80% from 10.80% for 2013. The operating profit margin was much lower at ~7.10% in 2012 due to higher selling and general expenses.

The cost of sales was $9.22 billion in 2014, $9.19 billion in 2013, and $8.9 billion in 2012. The cost of sales fell as a percentage of revenue by nearly 0.75% due to the rise in sales of established pharmaceuticals and nutritional products.

Selling and general expenses include salary and benefit costs, third-party professional and marketing fees, outsourcing fees, shipping and handling costs, and other expenses not attributed to the cost of sales or R&D (research and development) expenses. The selling and general expenses were $6.53 billion in 2014—compared to $6.37 billion 2013. These costs were nearly flat at 32.30% as a percentage of revenue. The selling and general expenses were higher at $6.7 billion. This was ~35.30% as a percentage of revenue in 2012.

The R&D expenses were $1.35 billion in 2014 and $1.37 billion in 2013, due to lower late-stage clinical development costs. They were $1.46 billion in 2012.

The Health Care Select Sector SPDR ETF (XLV) has invested ~2.30% in Abbott. Companies like Danaher (DHR), Baxter International (BAX), Herbalife (HLF), and Idexx Laboratories (IDXX) compete on different product segments with Abbott.

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