Medical devices giant Abbott Laboratories (NYSE:ABT) was on fire last year for one simple reason: Even though many of its business segments suffered due to the pandemic, the company established itself as one of the leaders in the COVID-19 testing market. Abbott Laboratories sold several hundred million coronavirus test kits last year, which helped keep the company's revenue and earnings afloat. In the fiscal year 2020, ending Dec. 31, Abbott Laboratories recorded sales of $34.6 billion -- an 8.5% year over year increase.

However, the healthcare giant's coronavirus testing tailwinds seem to be coming to an end. The company recently lowered its guidance because it anticipates a decline in demand for COVID-19 tests. This new development sent Abbott Laboratories' stock tumbling by more than 7%. And for the year, the company's shares are up by a measly 0.48%, compared with gains of 12.86% for the S&P 500. Should you buy Abbott Laboratories' stock on the dip?

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A closer look at Abbott Laboratories' new guidance

The worldwide efforts to vaccinate as many people as possible against COVID-19 continue. And while that's great news for the public -- which is anxious to put this pandemic in the rearview mirror once and for all -- it also means less need for diagnostic tests for the disease. This will obviously affect Abbott Laboratories' testing revenue, and it explains why the company decided to update its guidance for the full fiscal year 2021. 

The company now expects earnings per share (EPS) based on generally accepted accounting principles (GAAP) between $2.75 and $2.95, which compares unfavorably to its previous guidance of at least $3.74. The company also expects non-GAAP (adjusted) EPS between $4.30 and $4.50, lower than its previous projection of non-GAAP EPS of at least $5 for the year.

Person standing in front of a board with question marks on it.

Image source: Getty Images.

Should investors worry?

A lower guidance than previously announced is never good news -- for any company. However, it's important to look at things in perspective. First, note that the company's non-GAAP EPS would represent a 20.5% increase at the midpoint compared to the previous fiscal year. Abbott Laboratories' adjusted EPS increased by a lower 12.7% year over year in 2020.

Second, Abbott Laboratories' medical devices business will also benefit from the reopening of the economy. During the first quarter ending March 31, the company's medical devices sales grew by 13.1% to $3.3 billion. Meanwhile, in 2020, revenue from this same segment decreased by 3.7% to $11.8 billion. Lastly, and perhaps most importantly, Abbott Laboratories boasts several exciting growth opportunities.

One of these is its market-leading MitraClip System -- a device for the treatment of mitral regurgitation. In the first quarter, sales of this product jumped by more than 15%. The company also expanded Medicare reimbursement coverage for the MitraClip back in January, which broadened the potential client base for this product. The MitraClip will continue to provide a boost to Abbott Laboratories' financial results. 

The company is also betting big on its diabetes care segment, which has been one of its best performing to date. In the first quarter, the medical devices giant reported sales of $980 million from this business, representing an increase of 30.2% compared to the first quarter of 2020.  Abbott Laboratories' greatest weapon in this segment is its Continuous Glucose Monitoring (CGM) device, the FreeStyle Libre, which brought in nearly $830 million in sales during the quarter.

With companies such as DexCom and others, the CGM market is competitive. But in my view, there is more than enough space for multiple big players. And what's more, this market is poised to continue growing. According to Grand View Research, the CGM market will expand at a compound annual growth rate (CAGR) of 12.7% through 2027.

In short, Abbott Laboratories's prospects do not rely exclusively -- or even primarily -- on the market for COVID-19 diagnostic test kits. It isn't too surprising that investors chose to send its stock tumbling after it reported its updated guidance; the company's shares had benefited a great deal from its coronavirus efforts before that. Still, Abbott Laboratories' future remains bright, and given its recent dip, now is a great time to open a position in this healthcare stock

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.