Abbott Stock Ahead of Q4 Earnings Results: Smart Buy or Risky Move?

Abbott Laboratories ABT is set to report fourth-quarter fiscal 2024 results on Jan. 22.See the Zacks Earnings Calendar to stay ahead of market-making news.For fourth-quarter fiscal 2024, Abbott projects non-GAAP earnings between $1.31 per share and $1.37 per share.The Zacks Consensus Estimate for earnings has been steady at $1.34 per share over the past 90 days, indicating 12.6% growth from the figure reported in the year-ago quarter.ABT's Earnings Estimate Revision TrendImage Source: Zacks Investment ResearchThe consensus mark for revenues is pegged at $11.02 billion, suggesting growth of 7.6% from the year-ago quarter’s reported figure.ABT’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average earnings surprise being 1.64%.Let’s see how things have shaped up for ABT shares prior to this announcement:Factors to Note Prior to Abbott's Q4 EarningsDiagnostics: The Diagnostics arm is expected to have been driven by the widespread adoption of its top-tier systems and high testing demand across a variety of settings, including hospitals, laboratories, physician offices, retail pharmacies and blood screening facilities. In the core lab business, continued global demand for routine diagnostic testing and continued adoption of the company’s market-leading diagnostic systems and testing platforms, including recent large account wins, are likely to have helped sustain growth in the fourth quarter. The rapid and point-of-care diagnostics businesses are expected to have gained from the continued expansion of test menus and capitalized on the growing demand for respiratory tests that can be performed at home or in more traditional healthcare settings.Meanwhile, the demand for COVID-19 testing nosedived in the past several quarters and marred the segment’s growth. We expect to see another quarter of year-over-year decline in testing revenues this time too. However, the magnitude of this decline may have reduced because, during the fourth quarter of 2023, Diagnostic revenues were already soft and on a downward trend (in May 2023, WHO declared an end to COVID-19 as a public health emergency).Going by the Zacks Consensus Estimate, Diagnostics revenues are likely to have risen 1.4% year over year in the fourth quarter of 2024. Established Pharmaceuticals (EPD): Abbott’s EPD business benefits from a broad portfolio of products that are designed to meet the local needs of fast-growing emerging markets. In the fourth quarter of 2024, the division is likely to have continued its impressive streak of strong performance across several regions and therapeutic areas, including respiratory, women's health and central nervous system/pain management. Growth is expected to have been driven by favorable demographic trends, including increasing population, growing middle class and increasing focus on expanding access to healthcare.In addition, the company recently identified biosimilars as a new strategic growth pillar for EPD. Biosimilars currently represent the highest growth segment in the branded generic pharmaceutical market.  Abbott achieved several milestones in recent times in terms of advancing its portfolio of biosimilars, which are expected to have positively contributed to the company’s fourth-quarter top line.The Zacks Consensus Estimate for the segment’s revenues indicates a year-over-year increase of 6.9% in the fourth quarter of 2024.Medical Devices: The segment has been a standout performer for the company, steadily growing over the last several quarters and making a notable impact on the margin performance. In the fourth quarter of 2024, the business’ sales are likely to have been driven by the Diabetes Care division. This is expected to have been driven by the Freestyle Libre sensing technology, which alone surged 21% in the third quarter. The company is also expected to have benefited from the U.S. launch of Lingo, the company’s new over-the-counter glucose monitoring sensor. Further, the global partnership with Medtronic MDT to connect Freestyle Libre with MDT’s automated insulin delivery systems is also likely to have contributed to growth in the fourth quarter.The electrophysiology portfolio is likely to have delivered robust performance across key regions and product categories, particularly in the ablation catheters and cardiac mapping areas. Within Structural Heart, we expect the company to report robust performance, led by several recent launches that are driving new adoption and share capture, including TAVR, LAA and tricuspid repair. The recently launched tricuspid repair device, TriClip, in the United States is expected to have contributed to the business’s fourth-quarter sales.Within the Rhythm Management arm, Abbott’s new leadless pacemaker, AVEIR, and the company’s newest implantable cardiac monitor Assert are making strides. Furthermore, the growth in the Neuromodulation division may have been led by the sales of Eterna, a rechargeable neurostimulation device for pain management. All these developments are anticipated to have greatly boosted Abbott’s top line in the quarter under review. In Neuromodulation, growth is expected to have been driven by strong demand in international markets for the Eterna rechargeable spinal cord stimulation device.According to the Zacks Consensus Estimate, the Medical device segment’s revenues are expected to improve 11.8% year over year in the fourth quarter.Nutrition: In this division, sales of pediatric nutrition are likely to have been robust as Abbott continued to capture market share in the infant formula business. We also anticipate solid growth across the international portfolio of infant formula, toddler, and adult nutrition brands in the fourth quarter of 2024.The Zacks Consensus Estimate indicates a 5.8% improvement in the segment’s revenues in the fourth quarter compared with the same period in 2023.Abbott Shares Outperform Industry and Sector in Q4Shares of this MedTech giant edged down 0.4% during the fourth quarter of 2024 compared with the broader industry’s 4.1% decline. The stock has also outperformed the Medical sector’s 12.2% decline. The S&P 500, in contrast, rose 3.7% in this period.During this period, the company’s direct peer, MDT’s shares plunged 11.3% while another competitor, Boston Scientific’s BSX shares rose 6.1%.Q4 Stock ComparisonImage Source: Zacks Investment ResearchExpensive ValuationABT stock is not so cheap as its Value Score of C suggests a stretched valuation at this moment.In terms of the forward 12-month Price/Earnings ratio, Abbott’s shares are trading at 21.95X, higher than the sector’s 21.42X.Among the company’s peers, while MDT currently trades at a forward 12-month P/E of 15.33X, BSX trades at 35.35X.Image Source: Zacks Investment ResearchWhy is Abbott Stock a Buy Now?Abbott’s diversified business model has been a significant factor in its consistent performance. It has also helped the company to mitigate risks associated with market fluctuations in any single segment. The company’s strong market position, promising growth prospects and consistent share gains make it a compelling stock to keep in one’s portfolio.Further, Abbott’s financial strength, as evident from its strong cash flow and conservative leverage profile, enhances its ability to invest in growth opportunities. The stock’s Zacks Rank #2 (Buy) underscores its upward potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. 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