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Abbott or Stryker: Which Is Controlling Expenses Better?

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Expense projections for 2019

On its fourth-quarter conference call, Abbott Laboratories (ABT) guided for adjusted SG&A (selling, general, and administrative) expense-to-sales percentages of over 32% in the first quarter and 29.5% in 2019. The company has guided for adjusted R&D (research and development) expense-to-sales percentages of close to 7.5% in the first quarter and 2019.

According to its fourth-quarter conference call, Stryker (SYK) expects a YoY (year-over-year) operating margin expansion of 30–50 basis points in 2019. The company is focused on reducing operating expenses through its CTG (cost transformation for growth) initiatives partly offset by increased expenses due to recent acquisitions and ongoing investments. To learn more about the CTG program, read How Stryker’s Margins Are Driven by Its CTG Program.

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Wall Street projections

Analysts expect Abbott’s adjusted SG&A-to-sales percentage to fall 91 basis points YoY to 32.27% in the first quarter, 109 basis points YoY to 29.58% in 2019, 44 basis points YoY to 29.14% in 2020, and 36 basis points YoY to 28.78% in 2021.

Analysts expect Stryker’s adjusted SG&A-to-sales percentage to fall 12 basis points YoY to 34.90% in the first quarter, 366 basis points YoY to 33.83% in 2019, 41 basis points YoY to 33.42% in 2020, and 32 basis points YoY to 33.10% in 2021.

Analysts expect Abbott’s adjusted R&D-to-sales percentage to increase by 11 basis points YoY to 7.50% in the first quarter and 19 basis points YoY to 7.43% in 2019. However, they expect its R&D-to-sales percentage to fall ten basis points YoY to 7.33% in 2020 and eight basis points YoY to 7.25% in 2021.

Analysts expect Stryker’s adjusted R&D-to-sales percentage to increase by one basis point YoY to 6.30% in the first quarter. However, they expect its R&D-to-sales percentage to fall by four basis points YoY to 6.28% in 2019, three basis points YoY to 6.25% in 2020, and six basis points YoY to 6.19% in 2021.

Abbott Laboratories is expected to have a more optimal SG&A spending pattern and higher R&D resource allocation than Stryker in the coming years.

Next, we’ll discuss dividends, interest expenses, and debt projections for Abbott Laboratories and Stryker in 2019.

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