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Abbott Laboratories’ Gross Margin Trends

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Dec. 13 2018, Updated 8:59 a.m. ET

Revenue forecast

In fiscal 2018 and fiscal 2019, Abbott Laboratories (ABT) is expected to generate revenue of $30.66 billion and $32.21 billion, respectively, compared with revenue of $27.39 billion in fiscal 2017. Meanwhile, peers Biogen (BIIB), Johnson & Johnson (JNJ), and Pfizer (PFE) are expected to have revenue of $13.31 billion, $81.35 billion, and $53.59 billion, respectively, in fiscal 2018. Abbott’s cash per share is $4.20, while Biogen, Johnson & Johnson, and Pfizer have cash per share of $21.31, $7.20, and $2.90, respectively.

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Gross margins

In the third quarter of this year, Abbott’s cost of products sold rose YoY (year-over-year) to $3.17 billion from $2.88 billion, and its amortization of intangible assets rose YoY to $544.0 million from $501.0 million. Its gross margin expanded YoY to 51.5% from 50.6% due to better margins in the company’s diabetes care and cardiovascular and neuromodulation businesses.

Expected trends

Abbott’s gross margin is expected to be 59.32% and 59.69%, respectively, in fiscal 2018 and fiscal 2019, compared with 59.30% in fiscal 2017. Meanwhile, Biogen’s, Johnson & Johnson’s and Pfizer’s fiscal 2018 gross margins are expected to be 86.71%, 71.09%, and 79.2%, respectively.

Valuation metrics

Abbott’s EV (enterprise value) is $139.33 billion, and its EV-to-revenue ratio is 4.58x. The stock’s forward PE ratio is 22.45x, its price-to-sales ratio is 4.24x, and its price-to-book ratio is 4.12x. Biogen’s, Johnson & Johnson’s, and Pfizer’s price-to-book ratios are 4.68x, 6.08x, and 3.63x, respectively. Next, we’ll look at Abbott’s operational performance.

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