After this morning reporting better than expected Q3 results and narrowing FY17 earnings guidance, shares of pharmaceutical firm Abbott Labs (ABT 55.88, +0.82 +1.49%) trade to fresh all-time highs.
Results were strong across all business segments as Nutrition, Diagnostics, Established Pharmaceuticals and Medical Devices all saw year-over-year revenue growth. Management noted that they are the quarter’s performance and believe the company is well-positioned to achieve the upper end of its initial full-year EPS guidance range.
That being said, ABT now sees FY17 EPS in the range of $2.48-2.50, narrowed from the prior $2.43-2.53 range. The company narrowed the range after issuing Q4 guidance for diluted earnings per share from continuing operations under GAAP of $0.28 to $0.30. The company forecasts specified items for Q4 of $0.44 primarily related to intangible amortization, acquisition-related expenses, cost reduction initiatives and other expenses. Excluding specified items, projected adjusted diluted earnings per share from continuing operations would be $0.72 to $0.74 for Q4. Further, for Q4 the company sees comparable operational sales growth in the mid to high-single digits with a positive impact from exchange of more than 2%. Additionally, ABT sees fully year comparable operational sales growth in the mid-single digits with a positive impact of nearly 0.5% on FY reported sales related to exchange.
Getting to the Q3 period, ABT reported strong earnings of $0.66 per share. Breaking down the Q3 revenue performance is quite simple as there were multiple points of strength. Namely, the company’s largest segment, Medical Devices, saw 98.2% sales growth on a reported basis. On a comparable operational basis, sales increased 5.6%. In Cardiovascular and Neuromodulation, worldwide sales were led by double-digit growth in Electrophysiology, Structural Heart, Heart Failure and Neuromodulation. Growth in Structural Heart was driven by the continued double-digit growth of MitraClip, Abbott's market-leading device for the minimally-invasive treatment of mitral regurgitation. In Heart Failure, during Q3, ABT received U.S. FDA approval for its HeartMate 3 system, which helps a weak heart pump blood through the body for patients with advanced heart failure. Worldwide Diabetes Care sales increased 21.7% on a reported basis in Q3, including a favorable 2.6% effect of foreign exchange, and increased 19.1% on an operational basis.
Next, Nutrition sales were up 0.8% in the period on a reported and operational basis. Sales growth in the quarter was led by above-market growth in the U.S. with continued strong performance across the company’s portfolio of infant and pediatric nutrition products. As expected, sales growth in China improved sequentially versus the prior quarter, which was offset by continued challenging market conditions in certain other international countries. Worldwide Adult Nutrition sales increased 0.7% on a reported basis in Q3, including an unfavorable 0.2% effect of foreign exchange, and increased 0.9% on an operational basis. International sales growth of 5.2% on a reported basis and 5.6% on an operational basis was led by growth of Ensure, ABT’s market-leading complete and balanced nutrition brand, and Glucerna, ABT’s market-leading diabetes-specific nutrition brand. As expected, U.S. sales growth was impacted by competitive and market dynamics.
Worldwide Diagnostics sales increased 5.4% on a reported basis in Q3, including a favorable 0.2% effect of foreign exchange, and increased 5.2% on an operational basis. Core Laboratory Diagnostics sales increased 5.7% on a reported basis in Q3, including a favorable 0.1% effect of foreign exchange, and increased 5.6% on an operational basis. Growth in the quarter was led by continued share gains globally. Molecular Diagnostics sales increased 2.7% on a reported basis in Q3, including a favorable 1.6% effect of foreign exchange, and increased 1.1% on an operational basis. Point of Care Diagnostics sales increased 5.8% on a reported basis in Q3, including a favorable 0.2% effect of foreign exchange, and increased 5.6% on an operational basis as this business continues to build and expand its presence in targeted developed and emerging markets.
And lastly, Established Pharmaceuticals sales increased 15.7% on a reported basis in Q3, including a favorable 1.4% effect of foreign exchange, and increased 14.3% on an operational basis. Key Emerging Markets comprise several countries that represent the most attractive long-term growth opportunities for Abbott's branded generics product portfolio. As expected, sales in India were positively impacted by purchasing patterns following the implementation of a new Goods and Services Tax system that lowered second quarter sales in that country.
Also on the conference call, ABT management gave some interesting commentary. Among these points, ABT management sees accretion from the earlier completed Alere deal “much more modest” than they had initially indicated for the first year. They also commented that the company is currently comfortable with its inventory levels both on a current product and post-January 1 product basis. Management also commented on the recent weather issues in the Texas Gulf Coast and across Puerto Rico, the earthquake in Mexico as well as the wildfires in California. Indications are that the hurricanes had and earthquake had modest impacts, and the California fires impacted employees more specifically than ABT’s operations. Finally, management parted on comments that the company is experiencing some good momentum into 2018.