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Abbott Laboratories (ABT) is trading lower following its Q3 results this morning. The company reported largely in-line results, with adjusted EPS of $1.42 and revenue increasing 14.5% yr/yr to $13.01 bln. Comparable sales grew 7.0%, accelerating from 4.8% in Q2. Q4 adjusted EPS guidance of $1.62-1.67 was also in line with expectations. However, ABT lowered its FY26 comparable sales growth outlook to approximately 6% from 6.5-7.5%. Separately, ABT announced plans to separate its global Nutrition business into an independent, publicly traded company by the end of 2027.

• Medical Devices revenue increased 6.9% yr/yr to $5.83 bln, representing 7.8% comparable growth. Electrophysiology grew 15.5% on a comparable basis, although weakness in left atrial appendage closure partially offset strong demand for newer ablation products. Meanwhile, Diabetes Care growth of 6.7% reflected continued reimbursement constraints and increasing international pricing pressure. Management cited both businesses as the primary drivers of its reduced FY26 sales outlook.
• Diagnostics revenue increased 46.7% yr/yr to $3.31 bln, reflecting the acquisition of Exact Sciences, while comparable growth was 6.4%. Core Laboratory grew 5.4% on a comparable basis, supported by healthy testing demand across major markets, while Cancer Diagnostics increased 13.8%, driven by Cologuard and contributions from precision oncology.
• Established Pharmaceuticals revenue increased 6.8% yr/yr to $1.61 bln, representing 8.4% comparable growth. Demand remained broad-based across emerging markets, with key emerging markets growing 10.9%, including double-digit gains in India and other international markets.
• Nutrition revenue increased 5.1% yr/yr to $2.26 bln, representing 4.9% comparable growth. Pediatric Nutrition led the improvement, growing 8.7%, including an 11% increase in the U.S. supported by recent WIC contract wins.
• The Nutrition business generates approximately $8.5 bln in annual revenue, including brands such as Similac, Ensure, and Pedialyte. Management cited shifting consumer preferences and wellness trends as reasons for the separation, allowing ABT to focus on higher-growth healthcare businesses. Based on the current business mix, the separation is expected to accelerate ABT's sales growth by 50-100 bps and expand operating margin by approximately 100 bps.

Briefing.com Analyst Insight

Overall, the main blemish in ABT's report was its reduced sales growth outlook, as quarterly results came in largely as expected and profitability continued to improve. Meanwhile, the planned Nutrition spin-off could unlock shareholder value by allowing Abbott to focus on higher-growth, higher-margin healthcare businesses, while giving Nutrition greater flexibility to adapt to changing consumer preferences and wellness trends. However, the separation is not expected to be completed until 2027 and does little to address the near-term challenges facing Diabetes Care and Electrophysiology. While recent product launches provide opportunities for growth to accelerate, reimbursement constraints and international pricing competition could continue limiting Diabetes Care's near-term performance. As a result, management's upcoming FY27 outlook will be important in determining whether these growth opportunities can offset existing headwinds.