Abbott Is Expected to Report a Modest Rise in Net Profit Margins



Modest rise in net profit margins

Abbott Laboratories (ABT) has projected its 2017 gross margin to be ~60%, higher than the 57.3% it reported in 2016. This expansion can be attributed to the impact of Abbott’s integration of St. Jude Medical’s business as well as organic improvements in Abbott’s business prospects.

Abbott expects its 2017 research and development (or R&D) expenses as a percentage of sales to be ~7.5%. It expects its selling, general, and administrative (or SG&A) expenses to be ~30% of its 2017 sales.

For 2Q17, Abbott Laboratories expects to witness adjusted earnings per share (or EPS) in the range of $0.59–$0.61. The company expects its adjusted gross margin to be ~60%, while its R&D and SG&A expenses are estimated to make up 7.5% and 30.5% of its quarterly sales, respectively.

If Abbott Laboratories manages to surpass these margin projections, it could benefit the company’s share price along with the price of the iShares Core S&P 500 ETF (IVV). Abbott Laboratories makes up ~0.36% of IVV’s total portfolio holdings.

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Net profit margin projections

Analysts have projected Abbott Laboratories’ 2017 reported net profit margin to be ~11.1%, a year-over-year (or YoY) expansion of ~440 basis points.

In 2017, peers Medtronic (MDT), Thermo Fisher Scientific (TMO), and Boston Scientific (BSX) are expected to report net profit margins of ~14.5%, 12.0%, and 15.0%, respectively.

Abbott Laboratories is confident that emerging markets such as China will continue to drive profitability for its nutrition business in the long term. Further, the company has also focused on expanding its branded pharmaceuticals business, mainly in markets where there’s the possibility of double-digit YoY growth.


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