Expect Abbott To Raise Its 2014 Outlook Soon

Apr.22.14 | About: Abbott Laboratories (ABT)

Summary

Abbott has been one of the most successful companies for more than 125 years. Let's examine its most recent quarterly results.

We would have expected Abbott to raise its full-year outlook, at least by the magnitude of the quarterly beat, but the company confirmed its full-year 2014 ongoing earnings-per-share guidance.

We think this means Abbott will be hiking its guidance in the near future, perhaps as early as next quarter.

Valuentum has always liked Abbott (NYSE:ABT). The firm has been one of the most successful companies for more than 125 years. Abbott has leadership positions in a number of attractive markets such as 'Diagnostics' - where it is #1 in immunoassay diagnostics and #1 in blood screening - and 'Nutrition' - where it boasts brand names such as Similac, Ensure, and PediaSure, leading to its #1 worldwide position in both worldwide adult nutrition and US pediatric nutrition. The firm's 'Branded Generics' segment has strong positions in emerging markets, while its 'Medical Devices' segment is #1 in drug-eluting stents, #1 in bare metal stents, and #1 in LASIK. Abbott continues to execute nicely.

On Wednesday of last week, Abbott reported solid first-quarter results. On an operational basis, 'Diagnostic' revenues and 'Medical Devices' revenues advanced 5.1% and 0.3%, respectively, while its 'Nutrition' business revenues and 'Established Pharmaceuticals' segment revenues fell 1.7% and 0.7%, respectively. We're not reading too much into the declines in its 'Nutrition' operations, as the company is already well on its way to recovering and recapturing lost share from a supplier recall in August 2013 across certain international markets. We also think the weakness in the company's 'Established Pharmaceuticals' business will be short-lived, and management noted that key emerging markets such as India, Russia, Brazil and China represent the most attractive long-term opportunities in its branded generic product portfolio.

The company exceeded its own bottom-line expectations during the period, posting first-quarter ongoing earnings per share of $0.41, above its previous guidance range of $0.34-$0.36 per share. We would have expected Abbott to raise its full-year outlook, at least by the magnitude of the better-than-expected performance, but the company confirmed its full-year 2014 ongoing earnings-per-share guidance of $2.16-$2.26. Management may still be exercising conservatism this early in 2014 relative to its year-end targets, and Valuentum expects the company to raise guidance at some point in the near future. The existing guidance represents double-digit growth at the midpoint of the range.

Abbott is a Dividend Aristocrat, which means it has raised its dividend for 25+ consecutive years, and the company's recent quarterly dividend of $0.22 that it declared on February 21 was its 361st quarterly dividend. That's a fantastic track record of consistency and resiliency through the course of almost every imaginable market cycle. For investors interested in a strong dividend-paying equity, Abbott certainly fits the mold. At present, the company's annual dividend yield is 2.4%, and Valuentum is considering the company for inclusion in its actively-managed portfolios.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.