Will Abbott's (ABT) Steady Overall Growth Aid Q1 Earnings?

Abbott Laboratories ABT is slated to report first-quarter 2019 results on Apr 17, before the market opens. In the last reported quarter, the company’s earnings per share of 81 cents are in line with Zacks Consensus Estimate. However, Abbott delivered positive surprises in three of the trailing four quarters, the average beat being 1.47%.

Let's see, how things are shaping up for this announcement.

Factors at Play

Over the last few quarters, Abbott has been riding high on a healthy growth curve within its Diabetes Care business. The company has been hogging the limelight for developments in the flagship, sensor-based continuous glucose monitoring (CGM) system — FreeStyle Libre System.

At the end of 2018, the company provided some encouraging data, boosting investors’ sentiment around Abbott’s Diabetes Care segment. The company reported global sales of more than $1 billion from FreeStyle Libre System in 2018, reflecting a 100% increase on a year-over-year basis. In the fourth quarter alone, this business segment added 300,000 users and as of 2018 end, there were 1.3 million active users worldwide, of which approximately two-thirds are type 1 diabetics and one-third is type 2.

Meanwhile, the company recently initiated the launch of Libre 2.0 in Europe. While it is leaving no stone unturned to advance within its Diabetes Care segment, the upbeat trend firmly indicates another strong quarter of promising top-line numbers for this segment.

The Zacks Consensus Estimate of $537 million for Diabetes Care revenues indicates a rise of 27.6% from the year-ago period’s level.

Abbott Laboratories Price and EPS Surprise

Abbott Laboratories Price and EPS Surprise | Abbott Laboratories Quote

In sync with the prior reported quarter, Abbott is anticipated to gain from a strong performance by the Established Pharmaceuticals Division (EPD) business, which has been recording operational sales growth over the last few quarters. According to Abbott, its EPD business is growing at a faster pace than the market rate across several of its priority countries including India and China. Management expects mid-single-digit growth within EPD in the first quarter, comprising mid-to-high single-digit growth in the priority key emerging markets along with a modest decline in other EPD sales, which reflects the recent discontinuation of a non-core low margin third-party supply agreement.

Currently, the Zacks Consensus Estimate of $1.04 billion for EPD revenues shows a 3.9% slip from the year-earlier period’s number.

We are optimistic about the consistently sturdy Diagnostics business, courtesy of solid contributions from all sub-segments, namely Core Laboratories Diagnostics, Molecular Diagnostics and Point of Care. We are impressed by the accelerated pace of the company’s Alinity launch in Europe, driven by strong competitive win rates and even more robust retention rates. This business is growing more rapidly than its market rate. Per Abbott, it is well-positioned for sustainable growth in years to come based on the company’s rollout of the full suite of Alinity systems across additional geographies including the United States.

Within Rapid Diagnostics, in 2018, the company achieved its sales and synergy targets and is pleased with the progress of the integration of this business. However, from the first quarter of 2019, this business will be included in the company’s organic sales growth results and is expected to be relatively flat in the first quarter, reflecting the difficult flu season comparison.

The Zacks Consensus Estimate of $1.83 billion for Diagnostic revenues depicts a 0.4% improvement from the figure registered in the comparable quarter last year.

We also encouragingly note that Nutrition is Abbott’s most speedily-growing business owing to aging population, increasing rate of chronic diseases and the rise of the middle class in the emerging markets. Furthermore, Abbott’s pediatric nutrition business continues to thrive in the United States. For the first quarter, the company currently projects low to mid-single-digit sales growth.