Two of Abbott Laboratories' businesses are recovering from recent setbacks, which helped stoke a second-quarter earnings beat Thursday and pushed Abbott stock higher.
As Covid cases ease, more seniors are getting medical procedures that they previously delayed, Edward Jones analyst John Boylan said in a note to clients. Further, sales of infant formula in the U.S. bounded 22.5% higher following a year-earlier voluntary recall due to potential bacterial contamination.
"We see strength in demand for medical devices for at least the next few quarters, now that more seniors are getting procedures done post-pandemic," Boylan said. "The company could also see an ongoing rebound in market share in nutritional products after a product recall last year."
On today's stock market, Abbott stock jumped 4.2% to close at 111.83. Shares are forming a cup-with-handle base with a buy point at 112.95, according to MarketSmith.com.
Abbott Stock: Sales, Earnings Decline
Overall, Abbott's sales tumbled 11.4% to $9.98 billion, but beat expectations for $9.71 billion. On an adjusted basis, earnings sank 24.5% to $1.08 per share. But that topped forecasts by three pennies, according to Abbott stock analysts polled by FactSet.
Abbott blamed the sales drop on an expected decline for its Covid testing business. Revenue from Covid tests plummeted nearly 89% to $263 million in the second quarter. They now account for 11% of total diagnostic sales. In the year-earlier period, Covid tests accounted for 54% of diagnostic sales.
Excluding the impact of Covid tests, Abbott's sales climbed 11.5%.
Sales of medical devices popped 13.5% on a strict, as-reported basis to nearly $4.3 billion. Nutrition products revenue also rose 6.3% to $2.08 billion. Overall diagnostics sales tumbled 46% to $2.32 billion. The established pharmaceuticals business — which sells outside the U.S. — generated $1.29 billion in sales, up 5.2%.
Outlook Is 'Achievable'
For the year, Abbott raised its outlook and now expects sales to grow organically by a low double-digit percentage. The company retained its adjusted earnings view for $4.30-$4.50 a share. Abbott stock analysts called for adjusted profit of $4.40 per share and $39.62 billion in sales.
"We believe Abbott's guidance is, at a minimum, achievable, if not conservative," Edward Jones' Boylan said. "Abbott's strong lineup of existing and potential products and solid management gives us confidence in our near- and long-term sales and earnings outlooks."
The company's forecast includes $1.3 billion in sales of Covid tests, down from Abbott's prior view for $1.5 billion.
Boylan says Abbott stock analysts should count on some Covid sales going forward.
"Covid-19 test sales could eventually reach a predictable state as the pandemic likely fades into a seasonal pattern, like the flu," he said.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
