Despite meeting or beating analysts' earnings for a streak that stretches back half a decade, Abbott Labs (NYSE: ABT) hasn't been able to get much love from investors.


Analysts' Estimated Non-GAAP EPS

Actual Non-GAAP EPS


Price Change on Day of Earnings Release

Q3 2010





Q2 2010





Q1 2010





Q4 2009





Q3 2009





Q2 2009





Q1 2009





Source: and Capital IQ, a division of Standard & Poor's.

Yesterday's downturn, which started out worse than it ended, was likely due to the top line. Sales increased 11.8% after the acquisition of Solvay Pharmaceuticals, but missed analysts' estimates considerably.

Earnings are certainly what counts, and the cost cutting moves that allowed Abbott to beat estimates are commendable. But you can't cut costs forever, and revenue can often give hints about what is going to happen in the future.

Abbott's nutritional business fell 1.5% because of last month's recall of Similac baby formula. The plant that had the beetle infestation is back in production, but it's not clear how much the bad press could have pushed parents to formulas made by Mead Johnson Nutrition (NYSE: MJN) and Nestle.

And there's the loss of obesity drug Meridia, which wasn't a make or break product, but it's always better to have revenue than not.

Sales of anti-inflammatory Humira shot up 12.6%, competing well against Johnson & Johnson (NYSE: JNJ) and Merck's (NYSE: MRK) Remicade and Abbott Labs (NYSE: ABT) and Pfizer's (NYSE: PFE) Enbrel. But stellar growth is always a double-edged sword; the top-selling drug helps grow revenue, but the increase just makes Abbott more dependent on the drug, which made up nearly a fifth of Abbott's sales in the third quarter.

Abbott is guiding for full-year non-GAAP earnings between $4.16 and $4.18 per share, which would be about 12% growth over last year. Trading at about 12.7 times this year's guidance, maybe investors have already priced most of that earnings beat in.

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