abbott-sign-1603289429475.jpg
Source: Abbot Laboratories

Abbott Stock Rises, Q3 Earnings Beat Estimates

By

Updated

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?

Article continues below advertisement
abbott-q3-earnings-call-1603281385238.jpg
Source: Pexels

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.

Article continues below advertisement

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.

Article continues below advertisement

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.

Article continues below advertisement

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.

Article continues below advertisement

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.

Article continues below advertisement

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

Advertisement

More From Market Realist