The recent stagnation in global economic activity has played a pivotal role in determining the approach of prudent investors who have sought smarter, safer investments in attractive, large-cap, high-yield stocks that promise to offer higher returns on investment.
In this article, I have selected Abbott Laboratories (NYSE:ABT), which is a major player in the global pharmaceutical market. With an enormous share in global markets, a diverse product portfolio, planned product launches in the coming months, a range of profitable acquisitions, a high dividend yield and favorable market sentiment in recent quarters, Abbott shows a lot of investment promise for stock traders in the current year.
Abbott Laboratories is an international pharmaceuticals and health care products company having an enormous global market share. With a diverse product portfolio, the company has managed to maintain a wide competitive moat in a predominantly volatile and highly competitive market. As a result, the company has remained largely immune to unfavorable investor sentiment that has haunted multinational companies operating in other markets segments.
At $57 a share, the current trading price of the stock is at its highest in the last 52 weeks, although a brief period of increased market instability saw the stock shortly plummet to as low as $46. Abbott has a massive market capitalization of more than $90 billion with an average trading volume of nearly $7 million.
The company's performance in the last 3 years has been promising, with a range of lucrative investments and smart acquisitions that have allowed it to enjoy a strong market position while also spearheading high returns on equity, consistent dividends, and strong operating cash flows. In 2009, the company established its very own Vision Eye Care division after completing the acquisition of Advanced Medical Optics.
Consequently, in the first quarter of 2010, Abbott completed the planned EUR 4.5 billion acquisition of Solvay Pharmaceuticals and STARLIMS. This provided the company with an assortment of diverse pharmaceutical products allowing Abbott to expand its hold on existing market segments and penetrate into other key market segments.
In 2011, Abbott enjoyed a favorable run in the market, reporting earnings growth of nearly 12% compared to previous year's figures. The overall revenue generated throughout 2011 was nearly $39 billion with an impressive run in the third quarter returning nearly $9 billion. Owing to favorable investor sentiment and positive market trends in recent months, Abbott has started the current year with impressive financial indicators that suggest that the company is poised to achieve greater market growth and announce higher earnings per share.
Abbott currently has price to earnings ratio of more than 19, which is the highest in the industry compared to other leading pharmaceutical giants such as Merck & Co. (NYSE:MRK) at 18.78, ROCHE Holdings (OTCQX:RHHBY) at 14.35, and Sanofi (NYSE:SNY) at 13.31. Additionally, the company's earnings per share of more than $3 match or exceed those of Merck ($2), ROCHE ($3) and Sanofi ($2.84).
Abbott has traditionally enjoyed a good dividend history in the market; the company recently declared its 352nd consecutive quarterly dividend, and this has in turn attracted favorable investor sentiment for the business over a long history of trading. On its earnings per share of almost $3, the company offers investors more than 50c in dividends. This has allowed the company to enjoy favorable investor sentiment in recent fiscal quarters, and this has largely helped the business achieve higher levels of quarterly growth (4.1%) than enjoyed by competitors (1.7% and -8.5%). Furthermore, a Beta of 0.31 means that the company has a higher resilience to predominantly negative factors and volatile market conditions. This has allowed the business to perform well in the last two quarters of 2011 amidst sluggish trading and unfavorable investor sentiment.
Abbott has started the new year well, with aggressive trading of stock. The stock has continued its momentum from its high performance levels of the previous year. Despite the company's recent announcement to lay off 700 employees in a bid to narrow the focus of its global operations, favorable investor sentiment is at an all-time high, and profit levels of the business have increased by almost 12% since the start of 2012.
Abbott has recently been in the middle of fresh legal challenges for marketing and sale of its market-leading anti-seizure drug Depakote. The company arranged nearly $1.5 billion in settlement fee after Justice Department-led investigations revealed that the company may have been involved in illegal promotion and marketing campaigns encouraging Depakote for unauthorized uses. However, trading has still been largely favorable for the company, and investor sentiment is at an all-time high despite the fact that a legal settlement to pressing legal challenges has still not been struck.
My analysis of latest financial indicators, prevailing market conditions and recent developments suggest that Abbott enjoys favorable market sentiment largely because of its recent announcement to invest in a series of strategic moves. The company has announced acquisition plans to build a Laboratory Information Management System (LIMS) in emerging markets in Asia, Latin America and Africa. This will help the company narrow down the focus of its global operations on key market segments while also allowing the company greater flexibility to penetrate emerging market in Latin America, Asia and Africa. Among the acquisitions are Varilab (STARLIM's distributors in France), Iberica (for managing operations in Spain) and a privately-held Dutch company.
Abbott also plans to invest nearly $270 million in the development of a nutrition manufacturing facility in Ohio. The facility, once completed and in operation, is expected to cater to an increasing local demand for adult liquid nutrition products. With a range of new acquisitions and smart investments that are expected to bear good fruit, I believe that current financial indicators and market conditions are favorable to the business. I believe Abbott is poised for higher growth levels this year.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.