Who says health care isn't recession proof?
Certainly not Abbott Labs (NYSE: ABT ) . On a GAAP basis, fourth-quarter earnings per share were up a whopping 27%, at $0.98. Back out the $0.09 gain on sale of discontinued operations and EPS was still up more than 15%. Part of this gain was a 10.1% increase in revenue, but part was also some pretty good margin expansion, which I'll cover in just a moment.
Even better, the double-digit increases don't look like they're going to stop anytime soon; Abbott is looking for earnings of $3.65 to $3.70 per share this year -- an almost 18% increase over 2008's EPS of $3.12. Even on an adjusted basis, the company is projecting earnings growth of nearly 11%.
Compare that to the flat earnings Johnson & Johnson (NYSE: JNJ ) is hoping for this year, and you can see just how impressive Abbott's growth is.
Pretty much every segment of Abbott was on fire this past quarter. Pharmaceutical sales were up 9.8%, boosted by a whopping 42% increase in sales of anti-inflammatory drug Humira. Abbott expects that the drug will pass Johnson & Johnson's Remicade this year, and has set its sights on the leader, Amgen (Nasdaq: AMGN ) , and Wyeth's Enbrel. And the cholesterol drugs Niaspan and TriCor continue to fill in the gap left by Merck (NYSE: MRK ) and Schering-Plough's (NYSE: SGP ) Vytorin, with both showing double-digit year-over-year increases for the quarter.
Although it's the smallest segment, contributing less than 10% of total revenue for the quarter, vascular sales saw the largest increase in the quarter, jumping nearly 59%. Abbott's new drug-eluting stent, Xience V, and Boston Scientific's (NYSE: BSX ) identical Promus, which Abbott gets royalties from, have been giving fellow U.S. stent makers Johnson & Johnson and Medtronic (NYSE: MDT ) heartburn with how well they've been selling. Despite being launched just last year and competing against the Promus, the Xience had almost 30% of the U.S. market in the quarter.
As I mentioned earlier, increased sales are great, but where the company and investors really make out is through increased margins. And Abbott was more than impressive on this front. For the quarter, gross margin increased 380 (!) basis points to 60%. Operating margin was 21.9%, up some 90 basis points, and net margin grew 266 basis points to 19.3%.
All this growth does come at a price for investors, though. Abbott is trading at about 14 times 2009 guidance, compared to Johnson & Johnson's 12 times adjusted guidance and Merck's nine times guidance. In addition, both competitors are throwing off a higher dividend yield than Abbott. Still, assuming Abbott hits its benchmarks, the higher valuation is probably well worth paying for.
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