Abbott (ABT 0.14%) is projecting $2.5 billion in COVID-19 testing revenue for all of 2022, a low estimate considering the company made nearly that much in the fourth quarter alone. In this segment of "This Week in Healthcare," recorded on Jan. 31, Motley Fool contributor Keith Speights talks about Abbott's future as the coronavirus pandemic starts to ease.
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Brian Orelli: With Abbott, they reported earnings last week, and what did you think of the fourth quarter? I was a little surprised that COVID-19 testing was down year over year, but sales for the rest of the company looked pretty good.
Keith Speights: Yeah, I thought overall that Abbott again delivered a solid performance in Q4, total revenue jumped 7.2 percent year over year to $11.5 billion. Adjusted earnings were a little down. They came in at a $1.32 per share. That's lower than the $1.45 per share in the prior-year period. But it was still ahead of Wall Street expectations. Still just a solid quarter for Abbott overall.
You are right though Brian, COVID testing revenue fell from $2.4 billion in the fourth quarter of 2020, to $2.3 billion in the latest quarter. It fell just a little bit. I think it is surprising that it fell at all. But most of that decline, though, was because there was a big drop in molecular diagnostics, COVID testing. But Abbott's rapid COVID testing revenue increased a lot year-over-year due to a surge in US sales. I think what's happening here is that Abbott's rapid COVID test that those include BinaxNOW and ID NOW. I think that cannibalized is molecular diagnostics tests. In the latest quarter, the fourth quarter of 2021, rapid tests accounted for 90 percent of total COVID-19 testing revenue. I think we're just seeing this cannibalization, and the company doesn't make as much revenue off these rapid tests as it does the molecular tests. I think that's what's going on here.
To me, the biggest news in Abbott's Q4 update was that the company projects only $2.5 billion in COVID-19 testing revenue for all of 2022. Most of that amount would come early in the year. Granted, the company doesn't really have a good feel for exactly how the dynamics of the market are going to shake out this year, but that's still a really low estimate considering that Abbott made nearly that much in Q4 alone. I think we're going to see Abbott return to more of what it was pre-pandemic, which was a well-run healthcare giant with solid growth stemming primarily from its medical devices. Now, COVID-19 testing is still going to be important, but Abbott's clearly thinking that the gravy train is slowing to a halt here, not a halt, but slowing down considerably.
