Abbott Labs Tops 4Q Estimates - Analyst Blog

Abbott Laboratories (ABT) reported fourth quarter earnings of $1.30 per share, a penny above the Zacks Consensus Estimate and within the guidance range provided by the company. Earnings increased 10.2% from the year-ago period. Higher revenues helped drive results. However, including one-time items, earnings declined 6.1% to 92 cents per share.

Fourth quarter revenues increased 13.4% to $9.97 billion, above the Zacks Consensus Estimate of $9.89 billion.

Full year earnings came in at $4.17 per share, in-line with the Zacks Consensus Estimate and 12.1% above the year-ago earnings. Full year revenues increased 14.3% to $35.2 billion, just above the Zacks Consensus Estimate of $35.1 billion.

The Quarter in Detail

Fourth quarter revenues were mainly driven by the strong performance of the company's pharmaceutical division and vascular products. Foreign exchange (Fx) fluctuations negatively impacted revenues by 0.4%.

Pharmaceutical division sales were $5,939 million, up 22.5% (including a 0.9% negative Fx impact). Strong Humira and lipid franchise sales were offset by the weak performance of Kaletra, which declined 9.8% to $341 million. Pharmaceutical revenues included sales from the Solvay and Piramal deals.

The lipid franchise posted sales of $785 million during the quarter with TriCor/TriLipix sales increasing 19.2%. Meanwhile, Humira recorded sales growth in both the US (13.2%) and international markets (12.9%) during the quarter. Fourth quarter Humira sales increased 13% to $1.9 billion.

The Nutritional business remained flat at $1,433 million. Sales were impacted by the September 2010 recall of an infant formula product. Pediatric nutritional sales were down 5.6% during the quarter. With production of the infant formula product resuming from October 2010, Nutritional business sales should pick up.

Abbott Diagnostics posted sales of $1,015 million in the quarter, representing an increase of 4.1%. Meanwhile, the Vascular division continued to perform well, with sales increasing 13.7% to $822 million, thanks to strong growth in international markets. XIENCE V and XIENCE PRIME should continue performing well in Japan and Europe. The company reported coronary stent sales of $514 million, up 19.5% year-over-year,

Other division sales totaled $759 million, down 6.4%.

Abbott Labs Guides In Line

Following the release of fourth quarter and full year results, Abbott Labs issued guidance for 2011. The company expects earnings per share in the range of $4.54 to $4.64. The guidance includes the impact of US health care reform and EU austerity measures. We note that the Zacks Consensus Estimate is currently towards the higher end of this guidance range at $4.63 per share.

Abbott Labs also announced a restructuring program for its US pharma business given the impact of the US health care reform and the challenging regulatory environment. As part of the initiative, Abbott Labs intends to streamline operations to reduce costs and improve efficiencies.

Abbott Labs also provided an update on its pipeline. The company stated that it expects to gain approval for 75 new products or additional indications in the next five years. The company expects to have about 20 new compounds in phase II/III development by year end.

Abbott Labs is working on boosting its vascular products portfolio and expects to launch more than 10 technologies in the next five years. These include the potential US launches of MitraClip, XIENCE PRIME and XIENCE Nano. Abbott Labs expects to launch TREK, its next-generation balloon dilatation catheter, in the US and Japan in early 2011.

Meanwhile, the acquisition of Facet Biotech has helped strengthen Abbott Labs' early- and mid-stage oncology portfolio. The company is looking to move elotuzumab, which is being developed with Bristol-Myers Squibb (BMY), into phase III studies in 2011 for multiple myeloma.

Abbott Labs is also working on strengthening its neuroscience portfolio and has several candidates in different stages of development for the treatment of diseases like schizophrenia, pain, Alzheimer's and multiple sclerosis. Abbott Labs, along with partner Biogen (BIIB), moved daclizumab into a phase III study for the treatment of relapsing-remitting multiple sclerosis (RRMS).

Another promising pipeline candidate in the company's pipeline is bardoxolone, which is scheduled to enter into phase III studies in early 2011 for chronic kidney disease.

Neutral on Abbott Labs

We currently have a Neutral recommendation on Abbott Labs, which is supported by a Zacks #3 Rank (short-term “Hold” rating). Despite lingering challenges like the impact of the US healthcare reform, foreign exchange headwinds and EU pricing austerity, we believe Abbott Labs' strong business segments, contributions from recent acquisitions and late-stage pipeline should help the company deliver strong earnings growth.

 
ABBOTT LABS (ABT): Free Stock Analysis Report
 
BIOGEN IDEC INC (BIIB): Free Stock Analysis Report
 
BRISTOL-MYERS (BMY): Free Stock Analysis Report
 
Zacks Investment Research