Abbott recently reported its Q2 results, exceeding expectations with revenue of $10.4 billion and earnings of $1.14 per share. Despite this, the stock performance has been lackluster, with little change from $110 in early 2021 to around $107 now. In comparison, the S&P 500 has seen a 45% increase over the same period. Returns for ABT stock were 29% in 2021, -22% in 2022, and 0% in 2023. The company has underperformed the S&P in 2022 and 2023.
Consistently beating the S&P 500 has been difficult for individual stocks in recent years, including heavyweights in the Health Care sector and megacap stars. The Trefis High Quality Portfolio, however, has outperformed the S&P 500 each year over the same period. Given the uncertain macroeconomic environment, there is a question of whether ABT will underperform the S&P over the next 12 months or see a strong jump. Valuation analysis suggests ABT stock has some room for growth, estimated at $119 per share.
In Q2, Abbott saw revenue growth of 4% y-o-y, with a 10.2% increase in medical device segment sales, 3.5% growth in nutrition sales, and a 0.6% rise in established pharmaceuticals revenue. Diagnostics sales saw a 5.3% decline due to lower demand for COVID-19 testing, but excluding these tests, sales were up 5.9%. Diabetes sales within the medical devices segment were up 15.8%. Abbott expects its total 2024 revenue to rise 9.5-10% on an organic basis with an expansion of margins and a 5.6% increase in adjusted pre-tax income in Q2.
Overall, Abbott’s results were upbeat, with margin expansion and an upward revision for its full-year outlook. The stock has risen around 5% in the last five days, indicating potential room for further growth. With a valuation suggesting over 10% upside from current levels, Abbott appears poised for growth. In comparison with its peers, it will be interesting to see how Abbott continues to perform in the competitive market.
