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The Meat and Potatoes of Abbott Labs

It's not an easy time to be a health care investor.

Between the patent cliff, taxes, and Europe's meltdown, there's enough information and legislation swirling about to keep concerned shareholders up for days. Perhaps the biggest trend of a changing industry has come from spinoffs, however: Abbott Labs (NYSE: ABT  ) made waves in health care by offloading its pharmaceutical business, and other companies have joined in the spinoff game by dumping unwanted divisions.

With some of the biggest players in the industry shaking things up, investors are left wondering what to make of companies they've invested in -- and what to expect from the future. Let's take a look at the new Abbott Labs and the best-selling division investors will need to keep an eye on: nutritionals.

Eating up sales
Branded-drug sales once dominated Abbott's revenue, but with the spinoff of AbbVie (NYSE: ABBV  ) -- taking all $9.3 billion of Humira's 2012 sales with it -- Abbott has since been forced to concentrate on other areas. In the post-AbbVie world, Abbott's new largest division by sales is nutritionals, with $6.4 billion in sales last year.

That isn't an astronomical number by any means, particularly when compared to Humira's sales alone. However, the division's growing strongly: In 2012, nutritional sales grew by more than 9% in the U.S., while operational revenue internationally jumped more than 8%. U.S. growth actually outpaced Abbott's domestic branded-pharmaceutical growth last year before the AbbVie spinoff, and the nutritionals segment topped all divisions with more than $1 billion in sales in overall growth.

Pediatric nutritionals are surging in particular. The unit recorded astounding 14% domestic sales growth in 2012, rising to total revenue of $1.44 billion in the U.S. The division still records its best work overseas, however, as international sales of pediatric nutritionals dwarfed domestic sales by nearly $600 million in 2012.

Why the international surge? Abbott has focused a lot of time and resources in expanding its nutritional business overseas, and it has paid off. The company's been building research & development infrastructure closer to regional customers, spreading its reach around the world while launching products in emerging markets. India has taken up the lead in Abbott's developments: Abbott has focused heavily not only on pediatric nutrition in the world's second-largest nation, but also on diabetes nutrition in a country where it's estimated more than 50 million people live with diabetes. Cementing a foothold in growing India will reward Abbott in the future.

Growth in India and other emerging markets should also help Abbott in the sports nutrition business. The company is a major player in the business, and the worldwide sports nutrition market is expected to eclipse $6 billion by 2018.

Abbott does face a lot of competition in nutritionals. Nestle has stepped up in the business, purchasing Pfizer's (NYSE: PFE  ) infant nutrition business for $12 billion last year. Pfizer's old unit made 85% of its sales in emerging markets, and Nestle will vie with Abbott for dominance in these sought-after markets. The Chinese market is one to especially keep your eye on. Its infant formula market already represents more than 20% of the $41 billion worldwide market and could alone reach $25 billion by 2017. It's crucial that Abbott steps up its nutritional business in China.

A healthy look ahead
Nutritionals may not invite the same sort of starry-eyed revenue glamor that blockbuster drugs do, but make no mistake: If Abbott can continue to see strong growth in this division, the nutrition business will anchor a successful future for this company.

Abbott's more than just nutritionals, despite its largest-selling branch's strong growth. In the wake of the AbbVie split, however, it's difficult to grasp how much the old Abbott has changed into the new, sleeker company heading forward. To help investors better understand the situation, The Fool has created a brand-new premium report on both stocks. Inside, we outline all of the must-know opportunities and risks facing both companies, so be sure to claim this report by clicking here now.

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