When the best headline that a company can think of on a day that it releases earnings is that it will be engaging in a massive stock buyback, you know the quarter wasn't particularly exciting. Investors in pharmaceutical company Abbott Laboratories (NYSE:ABT) are getting just this headline today, in conjunction with Abbott's third-quarter earnings release.

For the third quarter, revenues were up a paltry 3.5% to $5.6 billion, and adjusted earnings were flat at $900 million. Thanks in part to share buybacks, adjusted earnings per share were up 5% to $0.61 a share versus the $0.58 a share the company earned last year.

The pharmaceutical division is holding back overall sales growth for Abbott, facing fierce competition against generic and other branded drugs. Excluding the pharmaceutical division, the rest of Abbott's divisions grew more acceptably, but pharmaceuticals are by far Abbott's biggest sector.


Y-O-Y Growth

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*All sales in millions
**Includes impact of Guidant acquisition

The bright spots in Abbott's quarter were that gross margins increased to 57% from 50% in the third quarter of last year. Also, despite the dismal overall performance of the company's pharmaceuticals division, sales of Humira grew 52% to $541 million for the quarter. In September, Abbott filed for an additional approval for Humira to treat Crohn's Disease; approval in this multibillion-dollar indication should drive Humira sales growth for a long time.

Abbott began the quarter with $2.9 billion in cash and investments, announcing that the company would be buying back $2.5 billion worth of shares over the coming quarters. At today's share price, that would represent a little over 3% of outstanding shares.

When the best use that a company has for its cash is a buyback, I usually take that either as a sign of a significantly undervalued stock, or as a signal that management can't find a better use for its cash. Since Abbott has guided for earnings for the year to come in at $2.11-2.13 per share on a GAAP basis, giving the company a P/E ratio of roughly 22, the buybacks don't appear to be due to a severely undervalued stock. If this buyback is a signal that the company has no better use for its money, then I'll pass on Abbott.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.