Abbott Laboratories, a multinational healthcare and medical devices company, released its third-quarter earnings on Wednesday, Oct. 21. How were Abbott Laboratories' third-quarter earnings? What are the key takeaways from the earnings call?
Abbott Laboratories' strong Q3 earnings
Abbott Laboratories released its third-quarter earnings on Oct. 21 at 7:30 a.m. ET. The company reported revenues of $8.85 billion in the third quarter, which were 9.6 percent higher than the same quarter last year. Abbott Laboratories' revenues were better than expected. Organic sales, which exclude the impact of currency movement, rose 10.6 percent in the quarter.
ABBOTT LABORATORIES Q3 20 EARNINGS:— First Squawk (@FirstSquawk) October 21, 2020
REVENUE: $8.85B (EST $8.54B)
-ADJ EPS: $0.98 (EST $0.91)
-SEES FY ADJ EPS: $3.55 (EST $3.33)
Key highlights from Abbott’s Q3 earnings
Abbott reported an adjusted diluted EPS from continuing operations of $0.98—a YoY increase of 16.7 percent. Abbott’s EPS was better than expected. “Our strong results and increased guidance are a direct reflection of our ability to innovate and deliver despite challenging conditions," said Robert B. Ford, Abbott’s president and CEO.
Sales of COVID-19 related tests were $881 million in the third quarter. The strong sales propelled a 38.2 percent increase in Abbott’s global diagnostic sales. Last month, the Trump Administration announced the distribution plan for Abbott BinaxNOW Ag Card rapid test in the U.S. The administration purchased the kits in August.
We appreciate the Trump Administration providing millions of innovative Abbott BinaxNOW tests to Ohioans, and my administration will continue to work on a plan to best incorporate them into our overall testing strategy in the coming days.— Governor Mike DeWine (@GovMikeDeWine) September 28, 2020
After the decline in the last two quarters, Abbott’s medical device sales also increased by 2.6 percent YoY in the third quarter. However, medical device sales are still down 5.0 percent in the first nine months of the year. The demand for medical equipment used in elective surgeries has been weak this year.
Abbott also raised its 2020 guidance and expects to post a GAAP EPS from continuing operations of at least $2.35 this year. Excluding one-time items, it expects to post an adjusted EPS of more than $3.55 in 2020.
Global stock mkts in Risk-On mood as optimism on pre-election stimulus agreement grows but European stocks slightly neg. Bonds drop w/US 10y jumps to 0.82% on fears of another debt tsunami. Dollar drops w/Euro at 1mth high at $1.1850. Gold rises on reflation hopes. Bitcoin >$12k pic.twitter.com/a0Gerviw55— Holger Zschaepitz (@Schuldensuehner) October 21, 2020
How did Abbott’s stock price react to the earnings?
Abbott stock was trading 1.3 percent higher in the premarket on Oct. 21. U.S. stock markets futures point to a flat opening on the same day with the S&P 500 future down 0.08 percent. Talks about the next stimulus package have been driving the markets in the last week.
How much upside do analysts see in Abbott stock?
According to analysts' estimates compiled by CNN, Abbott has a median target price of $119, which is 9.7 percent above its current stock price. Abbott’s highest target price of $136 represents a potential upside of 25.4 percent over the current prices, while the lowest target price of $99 is 8.7 percent below the current prices.
In October, Wells Fargo and JPMorgan Chase raised Abbott's target price. Currently, Abbott stock trades at an NTM PE multiple of 26.6x. In 2020, Abbott is trading at its highest valuation multiples since 2001. Due to the demand for COVID-19 testing kits and the recent uptick in demand for medical equipment for elective surgeries, Abbott stock looks reasonable at these valuations