Despite a price target cut on Wall Street on Tuesday, Abbott (NYSE:ABT) shares have recorded the best intraday gain since January 2021, when the stock climbed ~5% in a single day.
The uptick follows an agreement Abbott (ABT) announced on Monday to reopen its Sturgis, Mich., infant formula plant in agreement with the FDA.
The consent decree between the two parties allows the company to resume the operations at the facility subject to court approval at a time when the U.S. grapples with a nationwide shortage of baby formula worsened by the closure of the pant at the start of the year.
At the time, Abbott (ABT) recalled its Similac, Alimentum and EleCare powder formulas following several consumer complaints on bacterial infections.
Meanwhile, Wall Street analysts welcomed the agreement to reopen the plant.
It is “positive as it ensures a definitive pathway for reopening, which removes an overhang from the stock,” Bloomberg reported quoting RBC Capital Markets analyst Shagun Singh. The “pent-up demand bodes well for quick segment recovery,” the analyst added with an Outperform rating on Abbott (ABT).
Raymond James analyst Jayson Bedford with a similar rating on the stock agrees. The decree “is good for society (more supply will alleviate shortage issues), it is good for the government (faster intervention helps temper a growing public health concern), and it is good for ABT (an earlier than expected restart allows for better business continuity),” he added.
The positive remarks at RBC and Raymond James contrasted with Citi, which slashed the price target on Abbott (ABT) to $125 from $154 per share, citing, among other things, inflationary pressures and rising interest rates.
The closure of the plant and product recall led to ~19% YoY sales decline in Abbott’s (ABT) Nutrition segment for U.S. in 1Q 2022.