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Updated: 20-Oct-21 14:15 ET
Abbott Labs rides surge in COVID-19 testing activity to post impressive beat-and-raise report (ABT)
Prior to the pandemic, medical product giant Abbott Labs (ABT) was generally viewed as a slow-and-steady performer that produced consistent, albeit, unremarkable results. For instance, from 4Q16 through 1Q20, ABT's largest quarterly EPS beat was a modest $0.05. With the launch of its COVID-19 testing systems, however, ABT's financial results have recently more resembled an up-and-coming tech start up, rather than an established healthcare-related company. This shift was on display this morning when it reported blowout 3Q21 results, including a $0.46/share EPS beat, while lifting its FY21 EPS guidance sharply higher.
The main catalyst behind ABT's impressive beat-and-raise report is its Diagnostics segment, which generated yr/yr growth of 48%. In August and September, the Delta variant caused a resurgence in new virus cases, prompting a spike in demand for ABT's rapid testing products. Overall, COVID-19 testing sales jumped by 46% qtr/qtr to $1.9 bln as the company shipped over 225 mln tests during the quarter. Although new virus cases have slowed in recent weeks, demand for tests should remain elevated, especially as the government rolls out workplace mandates on inoculations and/or weekly testing.
Strong COVID-19 testing sales were the clear impetus behind ABT's exceptional performance, but the remainder of ABT's Diagnostic lab systems (immunoassay, hematology, DNA/RNA extraction, etc.) also produced solid results. Excluding COVID-related testing, Diagnostic sales were up 11.7% yr/yr.
A recovery in medical procedure volume is providing another tailwind for ABT. During the initial stages of the pandemic, ABT's Medical Device segment took a hard hit as patients postponed cardiovascular procedures. In 2Q20, the segment's revenue plunged by over 21%. As patients steadily return to the hospital to take care of these operations, sales of ABT's heart and diabetes care products have rebounded. In fact, Medical Device sales overall grew by 18.5% on a reported basis compared to pre-pandemic sales in 2019.
The better-than-expected Q3 results are certainly good to see, but we believe the primary force behind the stock's rally is ABT's guidance. Notably, the company didn't just increase its FY21 EPS guidance by about the same amount it outperformed Q3 estimates by. Previously, ABT forecasted FY21 EPS of $4.30-$4.50, which was boosted by $0.70 on the low end, and $0.60 on the high end, earlier this morning. Therefore, ABT essentially guided for Q4 EPS of around $1.09-$1.19 vs. the $0.95 consensus estimate.
What ABT's beat-and-raise report shows is that the COVID-19 testing catalyst has more staying power than anticipated and that its Medical Device segment has emerged from the pandemic in a stronger position.
The main catalyst behind ABT's impressive beat-and-raise report is its Diagnostics segment, which generated yr/yr growth of 48%. In August and September, the Delta variant caused a resurgence in new virus cases, prompting a spike in demand for ABT's rapid testing products. Overall, COVID-19 testing sales jumped by 46% qtr/qtr to $1.9 bln as the company shipped over 225 mln tests during the quarter. Although new virus cases have slowed in recent weeks, demand for tests should remain elevated, especially as the government rolls out workplace mandates on inoculations and/or weekly testing.
Strong COVID-19 testing sales were the clear impetus behind ABT's exceptional performance, but the remainder of ABT's Diagnostic lab systems (immunoassay, hematology, DNA/RNA extraction, etc.) also produced solid results. Excluding COVID-related testing, Diagnostic sales were up 11.7% yr/yr.
A recovery in medical procedure volume is providing another tailwind for ABT. During the initial stages of the pandemic, ABT's Medical Device segment took a hard hit as patients postponed cardiovascular procedures. In 2Q20, the segment's revenue plunged by over 21%. As patients steadily return to the hospital to take care of these operations, sales of ABT's heart and diabetes care products have rebounded. In fact, Medical Device sales overall grew by 18.5% on a reported basis compared to pre-pandemic sales in 2019.
The better-than-expected Q3 results are certainly good to see, but we believe the primary force behind the stock's rally is ABT's guidance. Notably, the company didn't just increase its FY21 EPS guidance by about the same amount it outperformed Q3 estimates by. Previously, ABT forecasted FY21 EPS of $4.30-$4.50, which was boosted by $0.70 on the low end, and $0.60 on the high end, earlier this morning. Therefore, ABT essentially guided for Q4 EPS of around $1.09-$1.19 vs. the $0.95 consensus estimate.
What ABT's beat-and-raise report shows is that the COVID-19 testing catalyst has more staying power than anticipated and that its Medical Device segment has emerged from the pandemic in a stronger position.
