PRODUCTS & INNOVATION
Execution on strategic moves and a strong product pipeline powers sustainable revenue growth for the long term.
Jul 27 2018
Investors hunting for reliable performance have always been attracted to Abbott’s consistent results and more than 46 years of continual dividend increases.
But today, thanks to a series of strategic moves that have reshaped the company, refocused its operations and reinvigorated its product pipeline, Abbott is positioned to deliver not just consistent performance, but accelerated growth in the years to come – a fact that is becoming increasingly apparent to Wall Street based on second quarter earnings that beat expectations.
“We view this performance as further validation of our thesis that Abbott has the right mix of businesses and product cycles,” wrote Christopher Pasquale of Guggenheim Securities LLC in a note this month to investors. With all four of its businesses contributing strong growth in the quarter, Abbott’s numbers “showcased the breadth of its top-line momentum,” he said.
Abbott extended its streak of beating Wall Street’s average quarterly earnings estimates past 10 years. With 8 percent organic growth1 in the quarter and strong demand prospects, Abbott raised its 2018 earnings projection to 15 percent2 and increased its estimate for full-year organic growth to 6.5-7.5 percent.
“This is the range of revenue growth we're going to sustain,” Miles D. White, Abbott’s CEO and Chairman of the Board, told analysts on the company’s earnings call. “I’m confident about the company’s overall sustainable growth because we’ve executed on our strategy to be in the right markets at the right times.”
Shaping Markets with Life-Changing Technologies
And in each of these markets, Abbott is offering new products and services designed to help build market share and continue the new accelerated growth rate.
In the company’s medical devices business, which grew more than 8 percent3 in the second quarter of 2018, these innovations include Freestyle Libre, a breakthrough glucose-monitoring system that has been gaining 50,000 new patients around the world every month; the Proclaim Elite spinal-cord-stimulation system, which employs a proprietary algorithm, called BurstDR, that emulates natural firing patterns of nerves in the brain; and Confirm Rx , the only smartphone-compatible insertable cardiac monitor on the market.
In diagnostics, Abbott’s Alinity family of systems positions this already-market-leading business for sustained above-market growth over the next several years. Alinity is a total enterprise solution designed to help hospitals and laboratories achieve measurably better healthcare performance. Alinity continues to impress customers in Europe with its game-changing versatility, and is rolling out in the U.S. this year.
Aligning with Trends
Adding to Abbott’s long-term growth potential for higher organic growth is the fact that many of its businesses align with the fastest-growing segments in both developed and emerging markets.
The company’s established pharmaceuticals business, for example, is a uniquely powerful growth engine focused entirely in fast-growing emerging markets. As these economies grow, and access to care expands, Abbott’s localized product portfolios, targeted to the specific needs of each market, will help it sustain above-market growth in its areas of focus.
Abbott is also very well positioned to benefit from the aging of the global population, with products in every one of our businesses to address conditions associated with growing older. For example, Abbott’s structural heart business offers devices that address heart-valve damage, will grow as the population ages and the number of patients requiring minimally invasive valve-repair solutions for their less-efficient hearts expands. Demographic changes also bode well for the adult nutrition business, with brands such as Ensure and Glucerna that can help older adults fill gaps in their diets.
“I am quite confident that what I see in the underlying trends of each of these businesses,” White said during the second quarter earnings conference call with analysts this month. “I'm very pleased with nutrition, very pleased with the acceleration in Alinity in diagnostics, I'm pleased with the steady ramp which only gets better and better with Libre, and those are big, big growth drivers across the board.”
After a several-year period during which Abbott executed a deliberate strategy to reshape its portfolio, the company is “firing on all cylinders,” with enviable market positions and a robust pipeline of new technologies that have truly life-changing impact for people of all ages.
“The company’s new product launches continue to go well, with Libre and Alinity leading the way,” wrote Margaret Kaczor of William Blair & Co. “The investments made to support sustainable growth in these businesses are important to notice and should allow new product launches a long runway.”
FORWARD-LOOKING STATEMENTS Some statements in this communication may be forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Abbott cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Economic, competitive, governmental, technological and other factors that may affect Abbott’s operations are discussed in Item 1A, “Risk Factors’’ to our Annual Report on Securities and Exchange Commission Form 10-K for the year ended Dec. 31, 2017, and are incorporated by reference. Abbott undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law.
1 Organic sales growth: Excludes prior year results for the Abbott Medical Optics (AMO) and St. Jude Medical vascular closure businesses, which were divested during the first quarter 2017; Excludes the current and prior year results for Rapid Diagnostics, which reflect results for Alere Inc., which was acquired on Oct. 3, 2017; and Excludes the impact of foreign exchange. For full financial data and reconciliation of non-GAAP measures, please see our press release dated July 18, 2018. 1 On a GAAP basis, Abbott sales increased 17.0%.
2 Full-year 2018 GAAP EPS guidance of $1.34 to $1.40, 585% growth
3 On a GAAP basis, Medical Device sales increased 11.3%
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