Abbott Laboratories Stock Is Half What It Used to Be

Technically, Abbott Laboratories (NYSE: ABT  ) stock is trading at half of its 52-week high.

But only technically.

Abbott Laboratories stock hit a high in October of last year of 72.47, but when the new year hit, the company split in two, spinning its drug assets into AbbVie (NYSE: ABBV  ) . Investors that continued to hold AbbVie stock and Abbott Laboratories stock are looking at a combined value above $80 per share.

Much better.

Off the drugs 
Without its drug division, first-quarter earnings required a little juggling to compare apples to apples. Diluted earnings per common share from continuing operations, excluding specified items -- wow, that's a mouthful -- increased 5% compared to the same metric as the year-ago quarter. Basically, the company is pretending like it didn't own AbbVie and then backing out special items from both quarters.

The nutrition business helped drive sales up 3.5% at constant currency. Sales of baby formula and the like were up 9% at constant currencies. Diagnostics were up 6.4% year over year, ignoring currency changes.

Dragging down sales were medical devices, which saw sales drop 3% at constant currency. Much of the decline came from sales of its drug-eluting stent and related products, which fell 15% in the U.S. compared to the first quarter of 2012. U.S. sales are being dragged down by pricing pressure as it competes with Boston Scientific (NYSE: BSX  ) and decreased usage by the doctors. Boston Scientific reported a similar experience with U.S. sales of drug-eluting stents down a whopping 33%.

Outside the U.S. sales of the segment actually increased 6.7% thanks to launches into new territories. It's easy to see growth when the comparing quarter has zero sales. Boston Scientific wasn't able to manage that, international sales were down 6.5%

You'll recall that Johnson & Johnson (NYSE: JNJ  ) saw the writing on the walls and exited the drug-eluting stent business altogether. One has to wonder how long Abbott will give it. Abbott Laboratories stock might actually go up if the company followed Johnson & Johnson's lead.

I doubt we'll see that happen, Abbott just got a new stent, Xience Xpedition, approved in January. Maybe the newest offering can turn things around.

Is Abbott Laboratories stock a buy?
I can see why Abbott split off its drug business; the aforementioned growth in the combined stock price highlights the released value.

Of the two, though, I think AbbVie has greater potential for growth. It's exposed to potential generic competition for its megablockbuster, Humira, but it has a nice pipeline to back it up.

Abbott Laboratories stock isn't going to go anywhere until the company can get its medical device division moving back in the right direction. Unless you're content with holding to collect the dividend, I'd recommend watching for the turnaround before investing.

Abbott Labs has changed forever after losing its branded pharmaceutical business to a spinoff. If you're a current investor, or might be buying shares soon, make sure you truly understand the stock by reading The Motley Fool's brand new premium report on Abbott Labs. The report outlines all of the must-know opportunities and risks, along with a full year of analyst updates to keep you up to speed. Best of all, you can claim this report today by clicking here now.


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  • Report this Comment On April 30, 2013, at 6:51 PM, PEStudent wrote:

    Analyst's projections are looking at 12.7% annual eps growth. I don't trust such projections, but they don't appear to be down on Abbott! Right now, there's a worldwide shortage of baby formula - the U.K. is limiting sales in stores. Indian and Chinese demand is growing and they prefer the foreign formula like Abbott's Similac rather than poorly-regulated Indian or Chinese companies.

    Abbott's 1st qtr. 2013 saw sale of $5.4 billion of which $1.7 billion was Similac, and 45% of Similac revenues were from India and China.

    Medical devices were $1.3 billion of sales, so the article singling that out as the thing that Abbott depends on for life is not correct, since apparently the margins are high enough on Similac, Pediasure, Ensure, Glucerna, Gain, and other nutritionals to more than offset the earnings due to a significant drop in Medical Devices sales.

    Disclosure: I've been in the Abbott DRIP since 1991 and just put in a buy order to replace half the shares I sold in January to help pay cash for a new car. (I didn't touch my Abbvie shares!).

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