Here's Why You Should Hold on to Abbott (ABT) Stock for Now

Abbott Laboratories ABT has been gaining investors’ confidence on consistently positive results.

Over the past year, the company’s shares have outperformed its industry. The stock has gained 20.3% compared with 4.4% growth of the industry. Also, the company has outperformed the S&P 500’s 11.9% rise during this period.

The renowned medical devices and health care products provider has a market cap of $142.35 billion. Its five-year projected growth rate looks impressive at 10.7%. It is expected to scale new highs in the near term. The company has average positive earnings surprise of 1.45% for the trailing four quarters.

With solid prospects, it is worth holding on to the Zacks Rank #3 (Hold) company for now.

 

 

What Makes the Stock an Attractive Pick?

Strong Q3 Results: We are optimistic about the company's recently released third-quarter 2019 results, which show strong organic growth across the majority of products. Emerging market performance has also been extremely promising on several developments.

Robust Growth: The company received European approval (CE Mark) for two life-saving pediatric devices — Masters HP and Amplatzer Piccolo Occluder. The availability of the devices in the European Union seems to be a good way of tapping into the large pool of potential patients with congenital heart defects (CHD). The Structural Heart business is well-positioned for sustainable long-term growth on the rapid adoption of MitraClip in a highly underpenetrated market as well as a pipeline of technologies, targeting new growth areas.

Acquisitions and Partnerships to Add Value: Abbott recently collaborated with Sanofi to further simplify diabetes management. The companies will take an innovative approach, combining Abbott’s FreeStyle Libre technology with Sanofi′s insulin dosing information, to develop future smart devices for better patient care.

Abbott also partnered with Tandem Diabetes Care, wherein the companies plan to develop and commercialize integrated diabetes solutions. The intended solutions will integrate Abbott's glucose-sensing technology with Tandem's insulin delivery systems to develop an improved treatment option for diabetes.

Strong Diagnostics Arm: Within the Diagnostics segment, Abbott is currently working on the global rollout of Alinity suite of instruments. Abbott is making progress with its immunoassay and clinical chemistry testing systems in Europe, where the launch of Alinity is helping drive growth for the international Core Laboratory business. The company is currently in the early stages of launching Alinity instruments for hematology and molecular testing in Europe. Alinity is expected to strengthen Abbott's business position in the future.

Downsides

Weak Rhythm Management Sales: Sales for Rhythm Management in the United States were soft in the third quarter and declined year over year. Although Abbott is coming up with certain strategic measures, including organizational changes and product innovations, its near-term outlook is bleak.

Foreign Exchange Affects Sales: Foreign exchange is a major headwind for Abbott as a considerable percentage of its revenues come from outside the United States. The strengthening of the euro and some other developed markets’ currencies has been constantly affecting the company’s performance in international markets.

Which Way Are Estimates Heading?

The Zacks Consensus Estimate for 2019 revenues is pegged at $31.88 billion, suggesting 4.3% rise from the year-ago reported number.

Zacks Rank & Stocks to Consider

Currently, Abbott carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the broader medical space are Aphria Inc APHA, Owens & Minor, Inc OMI and Surmodics, Inc SRDX.

Aphria, currently carrying a Zacks Rank #2 (Buy), has projected first-quarter 2020 earnings growth rate at 113.33%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Owens & Minor estimates earnings growth rate of 300% for third-quarter 2019. It currently sports a Zacks Rank #1.

Surmodics, with a Zacks Rank #1, has projected earnings growth rate of 141.7% for fourth-quarter 2019.

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