Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=220233
Story Retrieval Date: 3/8/2014 9:57:07 PM CST
The newly reconfigured Abbott Laboratories on Wednesday announced substantially increased net earnings when compared to an adjusted year-ago figure, confirming its own guidance but falling short of analysts’ forecast.
Abbott Laboratories spun off its pharmaceutical branch AbbVie Inc. Jan. 1, effectively cutting the original Abbott in half and leaving Abbott to enjoy a strong first quarter.
The pharmaceutical giant reported a net profit of $544 million, or 34 cents per diluted share, reflecting a 55 percent increase from last year’s $351 million, or 22 cents per share, in continuing operations. Analysts had forecasted 41 cents per share.
Global sales of about $5.4 billion reflected a 3.5 percent increase operationally, led by strong performances in diagnostics and nutrition, its proverbial cash cow.
The split is clearly beneficial, said Morningstar analyst Debbie Wang. “I actually think that’s the reason the stock is up,” she said, referring to Wednesday’s closing price of $37.28, up 2.42 percent from Tuesday. “Once you pull out AbbVie and start looking at apples to apples, Abbott is making progress.”
Abbott reported a 15 percent increase in sales of $2.2 billion, or 40 percent of total sales, in emerging markets across major businesses including nutrition, core diagnostics and vascular devices, and expects continued growth through the rest of the year.
“We anticipate our key emerging markets to deliver double-digit growth for the full year as we continue to build out our local product portfolios and expand in-country in these markets,” CEO Miles White said in a conference call.
Nutrition in emerging markets accounted for 45 percent of total nutrition sales and increased 20 percent. White said Abbott expects to continue growth in emerging markets with sales of adult and pediatric nutrition.
White pointed to last year’s austerity measures and weak economic conditions as causes of a first quarter decline in sales in developed markets, which the company anticipated.
“We’re delivering on our current growth expectations despite a mixed global economy,” White said.
For the rest of the year, CFO Tom Freyman said, the company expects operational growth driven in large part by its nutrition business.
“We continue to forecast operational growth, that is, excluding the impact of foreign exchange, in the mid to high single digits with a somewhat higher forecast for nutrition offset by somewhat lower expectations for vascular,” he said.
White pointed to three priorities on which the company will focus on the coming year: continue growth in emerging markets, improve share gain and market expansion through new product launches and brand enhancement, and margin expansion across all business sectors.
“As we continue to execute on key business priorities we expect to deliver on double digit ongoing EPS growth target for full year,” White said.
Wang said she is looking for improved margins over the next two quarters as well as pipeline innovation if Abbott is to thrive independently of its pharmaceutical branch.
“They’ve gotten to where they are by making small purchases, not by innovating themselves,” Wang said. “To secure reimbursements moving forward, they need to get better at picking companies they buy or get better at technological leaps internally.”