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Long/short equity, newsletter provider, valuentum
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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.

Source: Expect Abbott To Raise Its 2014 Outlook Soon