Abbott Laboratories' (ABT) first-quarter results were better than expected, despite the decline of its Covid business. This was due to a stellar medical devices segment. In response, ABT stock surged.
Edward Jones analyst John Boylan stated in a client report that the medical devices division grew better than their cautiously optimistic predictions. Sales were higher than expected for heart valves, heart failure, and neuromodulation devices, largely due to product innovation.
ABT's stock rose 6.8% in morning trading on the stock market today, reaching its highest level since early February.
MarketSmith.com shows that Abbott shares recently retook the 50-day moving median. MarketSmith.com shows that the earnings announcement sent shares above their line of 200 days for the first two months.
ABT Stock: Organic growth drove the show
FactSet reports that adjusted earnings for the March quarter fell by 40.5%, to $1.03 a share, but beat analysts' expectations of 99 cents. According to the strictest reporting, sales fell 18.1%. They reached $9.75 billion. The Street, however, had predicted a lower $9.67billion.
However, organic growth was still strong. Abbott's organic sales increased 10%, excluding the effects of exchange rates, the exit of the pediatric nutrition business from China, and the declining sales of Covid tests.
Vijay Kumar, Evercore ISI analyst, wrote in a note to clients that the growth was "above expectations" and was driven by medtech, established drugs, and nutrition. Lower diagnostics were partially offset.
He maintained his Outperform rating on ABT and a 108-price target.
Medical devices sales increased 12.4% on an organic basis. Established pharmaceuticals and nutrition grew 11.1% and 10% respectively. Abbott's established products are only sold outside of the U.S. Diagnostic sales (excluding Covid tests) grew organically by 4.4%.
Covid sales fell by 78%, to $730 Million.
Structural Heart, Diabetes Key
Evercore's Kumar highlighted Abbott's strength in structural health.
Sales of MitraClips, which are used to stop leaks in the mitral heart valve, increased by 10%. Transcatheter heart-valve replacements saw a 64% increase in revenue. TAVR replaces a faulty valve in the heart without requiring open-heart surgery.
Abbott's FreeStyle Libre glucose monitor, marketed as a diabetes device, has reached $1.2 billion in sales. This included a 50% increase in the U.S. Kumar points out that there are more than 4.8 millions Libre users.
ABT's stock has been suffering from a lack of nutrition sales in recent quarters. Abbott recalled infant formula last fall. The company then noted that manufacturing issues had slowed the production. In the first quarter of this year, organic growth in pediatric nutrition was 18.4%. Sales in the U.S. grew by 36.1%.
"We felt the pediatric recovery was above expectations and a little faster," Kumar said.
Abbott anticipates organic sales growth of a single-digit percentage this year. This excludes its Covid tests. Abbott expects $1.5 billion in revenue from its Covid business. ABT analysts forecast adjusted profit of $4.39 a share and sales of $39.86 billion.