Abbott's EPD Growth Beats Market Trends: Here's How to Play the Stock

Core Insights - Abbott Laboratories' Established Pharmaceuticals Division (EPD) is focused on emerging markets, holding leading positions in significant pharmaceutical markets such as India and China, which positions the company for sustained growth in branded generics [1][3] - Despite a projected deceleration in growth for emerging markets to approximately 3.7% by 2025, Abbott's EPD sales increased by 6.9% in Q2 2025, with over half of its top markets achieving double-digit growth [2][3] - Abbott's strategic focus on biosimilars and a five-year compound annual growth rate (CAGR) of 8% for EPD indicates strong growth potential [3] Financial Performance - Year-to-date, Abbott shares have increased by approximately 16.8%, outperforming the Medical Product industry and the S&P 500, which rose by 3.5% and 7.7% respectively [4] - In Q2 2025, Abbott's Diabetes Care sales grew by 19.6% organically, driven by the success of the FreeStyle Libre CGM system [9][10] - Abbott expects full-year 2025 organic sales growth to be in the range of 7.5-8.0%, with adjusted diluted earnings per share projected between $5.10-$5.20 [11] Market Dynamics - Abbott's Diagnostics business accounted for 19.5% of total revenues in Q2 2025, with strong demand for routine diagnostic tests contributing to growth [7] - The company is investing $0.5 billion in facilities in Illinois and Texas to expand its presence in the molecular testing market [7] - Abbott's Diabetes Care segment is expanding access to over 6 million users globally through its FDA-cleared over-the-counter CGMs [8] Challenges and Outlook - Abbott faces challenges from trade tensions and geopolitical issues, which are impacting demand for MedTech products and increasing costs [12][14] - The Chinese government's volume-based procurement policies are expected to negatively affect Abbott's Diagnostics and EPD businesses, with a projected $700 million headwind to full-year 2025 sales [14] - Despite these challenges, Abbott's operational performance remains strong, with expectations for consistent earnings and margin performance in 2025 [19] Valuation - Abbott's forward five-year price-to-sales (P/S) ratio is 4.92X, which is lower than the industry average of 5.38X, indicating a potentially attractive investment opportunity [15][20]