One of the best growth stocks of all time, Abbott Labs (NYSE:ABT), slipped a bit in the second quarter. Overall sales were up nicely, 17.5% as reported, but gross margins softened. Looking at per-share earnings from continuing operations, Abbott experienced more than 7% growth in the second quarter.

Although the rate of growth eased up a bit sequentially, pharmaceutical sales growth was still robust. Drug sales climbed 18% in the second quarter, as Abbott drew on the strength of drugs like Mobic, HUMIRA, and Ultane.

Medical sales were also strong for the quarter. The adult nutrition business posted 25% growth, and the diabetes business was up more than 34%. Though the vascular business at Abbott is still quite small, it too posted solid global sales growth of 17%.

Less healthy was the gross-margin picture. Reported gross margins skidded notably on a year-over-year basis, dropping from 56% to 52.4%. Management is not ignoring this issue: The company is launching an initiative targeted at improving manufacturing efficiency and gross margins. While it looks as though the company will be recording a $200 million charge in the next quarter, it's clearly a good idea at this point to streamline the manufacturing side of the business.

Abbott is generally thought of as a drug company, and that's a more-or-less fair characterization. The nutrition, diabetes, and vascular businesses all have legitimate growth potential, but drug sales will continue to drive the bus for a long time to come.

For example, the acquisition of TheraSense has definitely paid off for the diabetes care division, and this business could hold more promise for the future than many currently believe. But the entire diabetes care business contributed less than any of the company's top three drugs, individually, so its impact has to be kept in context.

Abbott shares don't look like a screaming bargain, but the present price-to-earnings ratio P/E really isn't out of line with history. Of course, Abbott's history of success is no guarantee of future results. If R&D efforts aren't sufficient to restock the pipeline with high-potential drugs, growth will become increasingly difficult, and the company's stellar history won't be of much help.

I still believe Abbott is a quality health-care company, but it's facing some challenges that will take a year or two to resolve. If I could get these shares at a trailing P/E below 20, I'd be much more enthusiastic than I am today.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).