Why Abbott Laboratories Plans to Focus on Organic Growth in 2018



ABT’s focus in 2018

Abbott Laboratories (ABT) released its 4Q17 and fiscal 2017 earnings results on January 24, 2018. The company stated that its plan will be to focus on organic growth over the next year and going forward, after a slew of major acquisitions and strategic divestitures.

Abbott seems quite confident about its strong product pipeline and recent product launches. Abbott Laboratories CEO (chief executive officer) Miles White stated the following: “I’m not out looking for M&A and I don’t have any significant M&A on the radar screen…in fact, I don’t have any M&A on the radar screen because I want to hit those debt targets by year-end.”

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Organic growth drivers going ahead

In 2017, Abbott Laboratories launched a number of innovative products and expanded across geographies and business segments. The company witnessed strong R&D (research and development) productivity in the recent period, and this momentum is expected to continue in 2018.

Specifically, the St. Jude acquisition is expected to be the major growth driver, with an attractive product pipeline and portfolio. The Alere acquisition should also contribute to ABT’s organic sales growth, though the comparative contribution is expected to be lower because the Alere acquisition will take some time to integrate due to some of the internal organizational issues.

Alere is expected to emerge as a strong contributor to Abbott’s growth in another two to three years.

Significant investments in new product launches

Abbott Laboratories has been making significant investments in new product launches, such as its investment in Libre and in diabetes care, neuromodulation, and cardiovascular. The company also plans to make investments in manufacturing in the United States as well as in commercial capabilities.

By comparison, peers Medtronic (MDT), Becton Dickinson (BDX), and Thermo Fisher Scientific (TMO) invested approximately 7.9%, 6.9%, and 4.3%, of their total sales, respectively, toward R&D during their most recent quarters.

Investors looking to gain diversified exposure to ABT stock can consider investing in the iShares Russell 1000 Value ETF (IWD), which has ~0.76% of its total portfolio holdings in Abbott Laboratories.


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