In the last article I wrote on Abbott Laboratories (ABT), I expected the stock to build a foundation after the large gap down it took. These were my exact words at the conclusion of that article:
"As the Bollinger Bands have widened, the stock looks as if it is trying to build support at a predefined level. It is presently moving sideways toward the middle band. This is a good place to build a foundation for the stock."
The stock moved sideways a bit and then moved down another two weeks before it found the support level it liked. Since mid-November, it has been on a steady rise. Will it continue to move up? To answer this question I should build a quick history of ABT in 2012 and the split that has been in the news all year.
Quick History of Abbott Laboratory Split
It was back in October of 2011 when ABT made an announcement that it would split into two publicly traded companies. This would happen in January 2013 and the new company would have the name AbbVie (ABBV) and would be dedicated to research-based pharmaceuticals. The existing diversified medical products company would keep the Abbott name. For most of 2012, the market has been very enthusiastic about the split up.
Some Present Thoughts on the Split
AbbVie will become a separate company by January 2nd, and the stock is already trading. It lost value as investors chime in on a fair value price for the new stock. Trading in the "when-issued market," when-issued shares of Abbott opened the market at $29.05 and rose 4.3% to $30.30 when trading closed in the U.S. AbbVie when-issued shares, which Bloomberg said are trading under the ticker ABBV-W, opened at $37 and fell 5.4% to $35.
Abbott stockowners will receive one share of AbbVie for each share of Abbott they own. $14.7 billion was raised for the send off of AbbVie and $1.6 billion was promised to flow toward a dividend as well as R&D which is important to its future. For those that have an interest in both companies, Humira is expected to be the workhorse for AbbVie to start and is expected to generate 50%+ of the $18 billion in projected revenue for 2013. Humira is facing new competition from Pfizer's (PFE) recently approved Xeljanz, but analysts think Humira can maintain its place.
Morgan Stanley likes the new Abbott Company's expectation levels and believes that the company can hit its targets in 2013.
How can an investor go wrong with this company? The "Dividend Channel" recently named Abbott to its (S.A.F.E. 25) list that signifies an above-average dividend ranking statistics with a nice 3.3% yield. What does this mean? The Dividend Channel has four characteristics it looks for in a company to rank it:
- S- Solid return - hefty yield and strong.
- A- Accelerating amount - consistent dividend increases over time.
- F- Flawless history - never a missed or lowered dividend.
- E- Enduring - at least two decades of dividend payments.
The new Abbott in 2013 could result in better margins for the company. The new Abbott will have four major segments: nutritionals, devices, diagnostics, and established pharmaceuticals and will be playing catch up with competitors who have had better margins than Abbott. The company is already addressing the margin issue by streamlining distribution channels and building facilities in lower cost regions like China and India. Nutritionals is a key segment for the new company and management is already committed to raising margins here by 500 basis points by the end of 2015.
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Technically Speaking
The support level that ABT chose was just under '63' and the stock is presently just over '65.' Having recently pushed through the upper Bollinger Band, the stock is pulling back as would be expected. I will observe the future movement to see if the stock will use the middle band as support now. If it does, this may define a very strong upward movement. Its recent push up has the RSI indicator also peaking. I am of the opinion that the stock is not ready done pulling back yet. The MACD reveals this a little more for me. The MA's look like they have peaked and now are ready to pull back. So I think the recent high and present pullback has not finished taking place yet.
