Abbott Laboratories (ABT) is an American-based healthcare and pharmaceuticals company that is ranked among the leaders of the global pharmaceutical market. The main strengths of the company are its diverse product portfolio and massive shares in global markets. However, in recent years, the company has shifted its strategic emphasis to well-planned acquisitions and product launches. Moreover, the company has announced strategic decisions to divest some of its less profitable ventures through spinoffs and sales. These factors have mainly aided the business in maintaining a high dividend yield and impressive cash flows in the past few fiscal quarters.
Abbott has recorded impressive financial indicators in recent fiscal years, generating nearly $35 billion in revenue in 2010. Last year, the company earned a place among the Top 20 Biopharma employers by Science Magazine. Abbott is an enormous business with operations comprehensively spread across more than 130 countries. With a massive market capitalization of more than $96 billion and an average trading volume of nearly $7.5 million, the stock easily overshadows all of its major competitors. This has greatly immunized the business against predominantly unfavorable market forces and negative investor sentiment.
The stock closed the previous financial year fairly well, trading around $57 after recovering from a brief period of faltering investor trust that saw shares plummet as low as $46. However, with the start of the new financial year, the stock was seen gaining in the first fiscal quarter largely due to renewed investor sentiment. Currently, the stock is poised at around $61, which is impressive as that is the highest price in the past 52 weeks.
When I look back at the stock's performance in the past three years, it is evident that the company has made some very wise decisions that are expected to soon bear fruitful results for the business. One such strategic decision was the acquisition of Advanced Media Optics in 2009. The acquisitions of STARLIMS and Solvay Pharmaceuticals in the following year are also wise decisions that gave Abbott Laboratories a diverse range of pharmaceutical products. This has provided the company with a strong market position, allowing it to drive toward higher returns on equity and strong operating cash flows.
Merck (MRK) has enjoyed the reputation of being the traditional rival of Abbott Laboratories. It has a massive market capitalization of more than $117 billion, and average trading volume exceeds $14.5 million. Merck has a current trading price of $38 and price-to-earnings ratio of 19. The stock pays around $0.42 per share in dividends on earnings per share of $2. With such impressive financial indicators, Merck is expected to give its traditional rival Abbott Laboratories some tough competition this year.
GlaxoSmithKline (GSK), with a market capitalization of nearly $116 billion and average trading volume of $2.15 million, has traditionally had what it takes to be a world leading pharmaceutical company. However, the stock has shown high susceptibility to negative market forces and unfavorable investor sentiment, which has largely robbed the stock of the impetus needed to drive growth. The company had an inauspicious end to the past financial year, recording a 2% decline in sales levels as compared to the previous year's figures. The stock is also plagued by U.S.-led investigations into the company's marketing and sales practices. This has been met with skepticism by investors.
Sanofi (SNY) enjoys tremendous exposure to the European market, with sales in the region accounting for more than 30% of its total sales. The total market capitalization of Sanofi exceeds $105 billion, and the average trading volume is poised at an impressive $2.5 million. The stock is currently trading at around $39 after recovering from a collapse that sent it plummeting to as low as $30. However, most of the stock's performance in the past financial year was wayward and sluggish compared to that of Abbott Laboratories. This was largely due to a sharp plunge of 40% in publicly traded value rights and a series of patent losses last year. Therefore, I believe that Abbott Laboratories is a viable investment option that is more likely to promise higher returns on investment than Sanofi.
Abbott Laboratories reported earnings growth of almost 12% in 2011 compared to the financial figures for the previous year. Moreover, the company generated annual revenue of nearly $39 billion last year, which comprehensively overshadowed the annual revenue figures of all of its major competitors. To top it all off, Abbott Laboratories has the industry-highest price-to-earnings ratio of 19, which dwarfs that of its leading competitors, with Sanofi at 13.31, Roche Holdings (RHHBY.PK) at 14.35, and Merck at 18.78. Earnings per share of $3 is almost as impressive when set against Roche's $3, Merck's $2, and Sanofi's $2.84.
Abbott Laboratories is currently facing a lot of pressing issues that demand immediate resolution, the most critical being large-scale employee layoffs and an array of legal challenges. However, the company has a beta of 0.31, which is a testament to its resilience against predominantly unfavorable factors and negative market trends. This has mainly rescued the business from unfavorable market conditions during testing times. More recently, the business has made important announcements regarding investing in strategic ventures such as the construction of LIMS. This is expected to facilitate the business in narrowing down its strategic emphasis to core global operations and key market segments. Studying the recent decisions by Abbott Laboratories to invest in strategic projects and acquisitions, I believe that the company is poised for higher growth, increased market share, and greater operating cash flows.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.