Abbott Labs
But wait, it gets better. Revenue skyrocketed nearly 18%. Normally I'd be worried about the bottom line growing slower than the top line, as it can be a sign of operational inefficiencies that investors shouldn't tolerate.
In Abbott's case though, the disparity may be a good sign. The company acquired Solvay Pharmaceuticals in the first quarter, but apparently hasn't done much in terms of integrating the two companies. There are bound to be synergies that reduce costs and increase profits. Unlike Pfizer's
While I expect Abbott will be able to decrease expenses as the integration continues, investors need to keep an eye on the company's operating margins. The acquisition of Solvay came with exposure to developing countries, and Abbott has expanded its presence in emerging markets, joining pharma companies GlaxoSmithKline
While some investors will argue that some profit in developing countries is better than none, giving up high margins -- one of the main attractions to drug companies -- isn't particularly appealing to me. There's only a limited amount of capital to foster growth, and Abbott would be better served purchasing operations with high-margin products rather than expanding into areas where it can't sell its products for as much.