Abbott Wins

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Of all the academic ink that's been spilled on the subject of who wins in a takeover battle, the general consensus is that it's largely the shareholders. Only time will tell whether that's true for Boston Scientific's (NYSE: BSX) acquisition of Guidant (NYSE: GDT), but it looks as though Abbott Labs (NYSE: ABT) is already coming out a winner.

Assuming that no more weirdness ensures in the BSX-GDT affair, Abbott will end up acquiring Guidant's vascular business (and its R&D) for $4.1 billion. It will also buy $1.4 billion worth of BSX's stock and foot it a $900 million loan. That immediately enhances Abbott's credibility as a future player in the stent market. While Abbott's ZoMaxx stent has looked clinically interesting, not many were giving Abbott much chance of being anything more than a distant No. 4 competitor to Medtronic (NYSE: MDT) in the drug-coated-stent market.

But that's all still off in the future. We have earnings to discuss today.

Revenue in the fourth quarter climbed 7%, and operating income rose by more than 15%. As seems to be the case all the time these days, there were charges, gains, add-backs, and assorted detritus in the earnings numbers. Giving Abbott the benefit of the doubt, we should also note that gross margins perked up a bit and earnings per share rose by more than 13%.

There was respectable growth across the board, but pharmaceuticals still account for the majority of revenue. Here it was a case of the strong getting stronger, as Abbott's top drug, HUMIRA, continues to enjoy very good growth. Elsewhere, the diabetes business made a solid showing, while the nutrition sector was down versus last year.

Abbott has a reputation for being a steady-Eddy type of company -- not a lot of flashy growth or high-risk/high-reward products, but a reliable history of earnings and cash flow growth. But that's not to say the cupboard is bare -- HUMIRA is proving to have long legs indeed, and more distant products -- like a continuous blood glucose monitor and a drug-eluting stent -- combine with what could prove to be an underrated drug pipeline.

We're still in the midst of that annual move in the stock below a P/E of 20, but I'm not sure how long that'll last. This stock might not offer a rocket ride the way smaller biotechs and med-tech companies do, but at today's prices, at least you won't have to worry about a fiery re-entry.

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).