3 Keys to Watch In Abbott Labs’s Q2 Earnings

Abbott Reports Earnings Jul. 16

• Will Q2 Make Up for Q1’s Shortfall?

• Revenue fell 2.5% year-over-year in Q1

• Operating costs grew, pushing EPS down 30%

Key #1: Nutritional Sales Growth

Abbott nutrition products Source: Abbott Labs Media Center

• Nutritional revenue down 4% year-over-year in Q1

• Business is Abbott’s largest by revenue

• International sales biggest growth driver

China supplier recall slammed Abbott’s Q1 nutritional revenue

• China is the fastest-growing major infant nutrition market, with double-digit percentage annual growth

• Other major players have been hit from the recall: Danone’s early life nutrition sales fell 4.8% in most recently reported quarter

Problems in China

Source: Wikimedia Commons

Abbott can’t afford to trail behind in this industry

• Infant nutrition market valued at up to $50 billion with 7% annual growth, according to consulting firm Zenith International

• International sales are Abbott’s big growth market: International Pediatric Nutritional revenue jumped by 9% in 2013, while International Adult Nutritional sales climbed 8%

• Currency issues are likely to impact Abbott’s Q2 results

Nutrition’s Huge Opportunity

Diagnostics was Abbott’s best-performing unit in Q1

• Unit revenue climbed 2.6% despite a 2.5% currency hit

• Diagnostics sales growth has been strong: Abbott has recorded more than 4% revenue growth in each of the past two years

Key #2: Will Diagnostics Keep Up?

Source: Abbott Labs Media Gallery

This industry is booming at the right time for Abbott investors

• The immunochemistry diagnostics market, Abbott’s major business, is expected to grow at nearly 7% annually through 2018

• Abbott is in a tough fight with diagnostics giant Roche: Roche owns more than 30% total market share for diagnostics, with immunochemistry making up around 11% of the Swiss company’s total

Diagnostics: Abbott’s Best Growth Hope?

• Medical Devices have been a major drag on Abbott’s recent earnings

• Drug-eluting stent sales dropped 5% YOY in Q1

• Currency issues hit hard, costing 2.4% in sales growth

Key #3: Is a Turnaround Coming for Stents?

• Abbott’s next-gen Absorb stent has gained approval both in Europe and Asia

• Company picked up FDA approval of Supera peripheral stent in late March, but still waiting on an ongoing US trial for the Absorb

• Tight hospital budgets and intense competition with rival stent makers like Boston Scientific means that growth likely will be slow to come by in medical devices

Will Investors Be Left Wanting?

Abbott’s sale of generic assets to Mylan may spark news in the company’s conference call

• Company inked $5.3 billion sale of generic drug assets to Mylan over the past weekend

• Deal won’t impact results immediately, but is aimed to help Abbott concentrate on growth businesses and to focus generic drugmaking in emerging markets

Bonus Key: Watch for Generics News

• Nutritional growth is critical for Abbott’s long-term prospects

• Can Abbott keep up its diagnostics boom and close the gap with larger rivals like Roche?

• Will Abbott shore up falling revenue from its stents?

• Also: Keep an eye on the latest from Abbott’s new deal to sell generic drug assets to Mylan

Plenty of Keys to Keep an Eye On

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