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Why Abbott Stock Is Tumbling Today

By Keith Speights - Jun 1, 2021 at 11:41AM

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The healthcare giant lowered its full-year earnings outlook.

What happened

Shares of Abbott Laboratories (ABT 0.29%) were tumbling 7.5% as of 11:32 a.m. EDT on Tuesday. The decline came after the company announced lower earnings guidance for full year 2021.

Abbott now expects diluted earnings per share (EPS) of between $2.75 and $2.95 based on generally accepted accounting principles (GAAP), compared to its previous outlook of GAAP EPS of at least $3.74. The company projects full-year adjusted EPS of between $4.30 and $4.50. Its previous guidance was for adjusted EPS of at least $5. 

Yellow sticky note with a drawing of coronavirus over a chalkboard drawing of a dollar sign.

Image source: Getty Images.

So what

There's one primary reason behind Abbott's lower guidance: declining levels of COVID-19 testing. The company cited three key factors for this decline:

  • Significantly fewer COVID-19 cases in the U.S. and other major developed countries.
  • Increased availability of COVID-19 vaccines globally.
  • Changes to U.S. guidance on COVID-19 testing for fully vaccinated individuals.

Abbott acknowledged that these factors are positive and "signal an accelerated return to normalcy for many countries." However, the company previously projected stronger COVID-19 testing demand and recognized the need to revise its full-year estimates based on the changing market dynamics.

Now what

Don't think for a second that Abbott is in bad shape because of its revised full-year outlook. The enormous amount of money the company made in a relatively short time from COVID-19 testing allowed it to invest in other areas.

Even with the lower guidance, Abbott still should achieve solid double-digit growth compared to the prior year. Success for other products, notably including its FreeStyle Libre continuous glucose monitoring system, could provide additional catalysts for the healthcare stock in the future.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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