Abbott Laboratories Gains 12.7% in a Year: What's Driving the Stock?

Core Insights - Abbott Laboratories (ABT) has experienced a share price increase of 12.7% over the past year, outperforming the industry growth of 9% and the S&P 500's increase of 10% [1] - The company is recognized for its strong fundamentals and growth opportunities, currently holding a Zacks Rank 3 (Hold) [1] Business Segments - Abbott operates in four reportable segments: Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Medical Devices [2] - The Established Pharmaceuticals Division includes branded generics in emerging markets, while the Medical Devices segment covers diabetes care, vision care, and vascular businesses [2] - The Diagnostics segment manufactures and markets diagnostic systems and tests across core laboratory, molecular, point of care, and rapid diagnostics [2] - The Nutrition business offers a wide range of pediatric and adult nutritional products [2] Growth Drivers - Abbott's share price growth is driven by strong prospects in the Core Diagnostics business, with increased global demand for routine diagnostics, particularly respiratory disease tests [3] - Rapid diagnostics sales (excluding COVID-19 testing) rose by 16% year over year, while Core Laboratory Diagnostics grew by 4% due to strong demand for various testing panels [4] - The FreeStyle Libre continuous glucose monitoring system has achieved global leadership, contributing to investor optimism as the company leverages consistent upgrades [5] - The Nutrition business reported 7.1% organic growth in Q4 2024, with adult nutrition products like Ensure and Glucerna showing strong demand and an 11.4% growth rate [6] Challenges - In Q4, Abbott faced an 8.5% increase in product costs, leading to a 55 basis point contraction in gross margin to 55% [7] - Selling, general, and administrative expenses rose by 6.7% year over year, resulting in a 43 basis point contraction in adjusted operating margin due to geopolitical issues and a challenging economic environment [7] - Abbott is also exposed to currency fluctuations, with a 1.4% unfavorable impact on sales year over year in Q4 2024 [8] Financial Estimates - The Zacks Consensus Estimate for Abbott's 2025 EPS remains at $5.15, with an earnings yield of 4.1%, significantly higher than the industry's 0.4% [9]