ABT Stock Jumps 12% Since Q4 Earnings: Time to Invest in Abbott?

Core Insights - Abbott Laboratories faced industry-wide challenges in 2024, including rising inflation, labor shortages, and supply chain disruptions, which pressured profit margins [1] - Despite these challenges, Abbott's strong pipeline and innovation-driven growth strategy have supported its stock performance, with a robust growth outlook for 2025 [1] Stock Performance - Abbott's shares increased by 11.6% since its fourth-quarter earnings release, outperforming the broader industry (3.3%) and the Medical sector (2.5%), while the S&P 500 declined by 0.4% during the same period [2] - Compared to direct peers, Abbott outperformed Boston Scientific (5.7% increase) and Medtronic (3.8% increase), while Becton Dickinson declined by 3.5% [2] Q4 Earnings Highlights - Abbott reported a 12.6% rise in fourth-quarter earnings, with worldwide sales improving 8.8% organically, although they missed the Zacks Consensus Estimate [5] - The Medical Device business achieved 14% organic growth, with notable increases in Diabetes Care (23% growth in continuous glucose monitors) and Structural Heart (23% growth) [6][7] Growth Areas - Core Laboratory Diagnostics grew by 4%, driven by strong demand for various testing panels [7] - Established Pharmaceuticals and Nutrition also showed growth, with adult nutrition brands like Ensure and Glucerna leading double-digit growth [8] 2025 Outlook - Abbott projected organic sales growth between 7.5% and 8.5% for 2025, with adjusted earnings per share expected to range from $5.05 to$5.25, indicating double-digit growth at the midpoint [10] - The company anticipates an adjusted gross margin of 57% for 2025, reflecting an improvement of around 80 basis points compared to 2024 [11] Long-Term Growth Potential - Abbott's Medical Device business is expected to continue its growth trajectory, particularly with the FreeStyle Libre continuous glucose monitoring system, which has gained FDA approvals for new over-the-counter products [13] - The company is also advancing in biosimilars within its Established Pharmaceuticals Division, with commercialization expected to begin in 2025 [15] Challenges - Abbott faced a complex geopolitical situation leading to increased expenses, with an 8.5% rise in the cost of products sold in Q4 2024 [16] - The decline in COVID-19 testing demand has negatively impacted overall sales growth, with a 1% decrease in Rapid Diagnostics sales and a 10.2% drop in Molecular Diagnostics sales [17][18] Valuation - Abbott's forward 12-month price-to-earnings (P/E) ratio is 25.91X, which is a premium compared to the industry average of 22.66X and significantly higher than peers like Medtronic (15.80X) and Becton Dickinson (15.42X) [19]