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2 Green Flags for Abbott Labs and 1 Red Flag

By Cory Renauer - Feb 7, 2021 at 5:58AM

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Coronavirus testing won't last forever, but the future still looks bright for Abbott Labs.

Earnings season is flying along so quickly that you might've missed one of the most anticipated fourth-quarter reports in the healthcare space. Abbott Labs (ABT -0.27%) had a lot to say about its performance in 2020 and its plans for the year ahead.

In this Motley Fool Live video recorded on Jan. 29, 2021, Healthcare and Cannabis Bureau Chief Corinne Jurney Cardina and writer Cory Renauer discussed two key highlights and a soft spot to watch out for.

Corinne Cardina: Tell us about what Abbott Labs reported and any green flag from its earnings for the fourth quarter.

Cory Renauer: Sure, one big green flag in Abbott's fourth-quarter was incredible growth on the top and bottom lines because of new COVID-19 diagnostic tools. The company reported a new approval for one of their COVID-19 diagnostic tools. It seemed like every week last year, including a small cart for at-home use. The company reported sales that grew 28% year-over-year and adjusted earnings that grew 53% year-over-year. This is a big company that was earning a lot to begin with. Very impressive.

The second green flag for Abbott. The company issued really positive forward guidance for 2021. The company expects earnings-per-share to grow by more than 35% this year. There aren't any rewards for accurately predicting your earnings for the entire year in the beginning of the year. I'm not saying that companies lowball it and then raise it so they know they can raise it later. But I mean, starting out at 35% tells you that the company is confident about strong demand for the coronavirus test continuing through the year and the rest of their products as well.

Cardina: Certainly. Were there any concerns that might be a red or yellow flag?

Renauer: Again, orange flag, this is probably as close to red as we're getting today. Coronavirus testing demand isn't going to last forever. Although it sure feels like forever.

Cardina: I know.

Renauer: Once vaccine availability catches up with demand. I think it was over a quarter of total revenue that the company reported in the fourth quarter. That could drop off quickly before the end of the year. The company delivered 300 million COVID-19 tests in the fourth quarter. That's a lot of tests. That's not going to last forever.

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