Abbott Q3 Earnings Review: Tariff, Diagnostics Cap Near-Term Gains

Core Insights - Abbott's shares have increased by 0.7% since the Q3 2025 earnings release on October 15, 2025, with strong year-over-year growth in adjusted earnings and revenues, although revenues missed the Zacks Consensus Estimate [1][7] - The company faced challenges in Global Core Laboratory Diagnostics sales due to market conditions in China and external pressures from the ongoing tariff war, which have dampened investor enthusiasm [1][7] Segment Performance - Established Pharmaceuticals grew by 7.5% (7.1% organically), with emerging markets up 11.1% [5] - Medical Devices saw a growth of 14.8% (12.5% organically), driven by Diabetes Care (up 16.2%), Structural Heart (up 11.3%), and Heart Failure (up 12.1%) [5] - Nutrition sales increased by 4.2% (4% organically), supported by Ensure and Glucerna [5] - Diagnostics experienced a decline of 6.6% (7.8% organically), with Rapid Diagnostics falling by 27.7% [6] Margin and Cost Analysis - Gross profit rose by 6% year-over-year, but gross margin contracted by 46 basis points to 55.4% due to tariff impacts [7][8] - Selling, general, and administration expenses increased by 5.4% year-over-year, while research and development expenses rose by 7.4% [8] Strategic Outlook - Abbott's management is optimistic about navigating trade challenges by leveraging its diversified portfolio and strong brand recognition [9] - Investments in U.S. manufacturing and R&D aim to enhance supply chain resilience, with management guiding for high single-digit organic sales growth and double-digit EPS growth [10] Financial Guidance - For the full year, Abbott expects adjusted diluted EPS to be in the range of $5.12 - $5.18, with organic sales growth projected at 7.5-8.0% excluding COVID-19 testing-related sales [11] Market Position and Valuation - Abbott is currently trading below its 50-day and 200-day simple moving averages, indicating short-term bearishness [12] - The company's forward 12-month price-to-earnings (P/E) ratio is 23.10X, which is a premium compared to the industry average of 20.75X [14] - Despite strong performance, the stock price does not reflect the company's underlying strength, and geopolitical uncertainties are limiting near-term gains [17][18]