I'm not exactly sure what a company has to do to get investors excited, but apparently double-digit increases in revenue and earnings aren't enough to get it done. Abbott Labs (NYSE: ABT ) may be firing on all cylinders, but investors were less than impressed with its earnings release yesterday and sent the stock down 1.5%.
Sales were up 15%. All three divisions -- pharmaceuticals, medical products, and nutritional products -- saw double-digit growth. And Abbott was able to increase the bottom line even more. (That's something that Genentech (NYSE: DNA ) has been having trouble doing.) The quarter's earnings per share, excluding various one-time items, were up 22% to $0.84 per share.
One reason that Abbott's stock didn't move after stellar results in a tough market environment might be that investors have come to expect the growth. Abbott's 23 earnings multiple is higher than peers Merck (NYSE: MRK ) and Pfizer (NYSE: PFE ) and the much larger health-care conglomerate Johnson & Johnson (NYSE: JNJ ) . All three are in the 16 P/E range. With higher P/E comes higher expectations.
The other problem could be that, like Johnson & Johnson, Abbott has seen much of its growth fueled by international sales and currency movement. Exchange rate changes accounted for 5.9 points of the 14.8% growth in worldwide sales. When the dollar starts to climb again, a fair amount of that international growth is going to disappear.
Abbott increased both its revenue and earnings guidance for the year. One big question is how well the U.S. launch of its new drug-eluting stent, Xience V, will go. Medtronic (NYSE: MDT ) made some good penetration in the first quarter with its stent, which, ironically, is probably a good sign for Abbott. It means that doctors are eager to try new products after having been stuck with a duopoly of J&J and Boston Scientific (NYSE: BSX ) for so long.
Foolish investors shouldn't really worry about the short-term movement of Abbott's stock, down or up. If the company can continue its excellent growth, Abbott's stock price will follow.