Abbott(ABT) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2025, sales increased by 3.8% excluding COVID testing sales, with adjusted earnings per share (EPS) of $1.50 reflecting a growth of 12% compared to the prior year [18] - Adjusted gross margin was 57.1% of sales, an increase of 20 basis points year-over-year, while adjusted operating margin rose by 150 basis points to 25.8% [18] - The company forecasts adjusted EPS for 2026 to be in the range of $5.55-$5.80, indicating a 10% growth at the midpoint [19] Business Line Data and Key Metrics Changes - Nutrition sales declined in Q4, impacted by market share loss and increased manufacturing costs, with a focus on reigniting volume growth through price and promotion initiatives [9][10] - Diagnostics sales decreased by 3.5% due to a decline in COVID testing, but Core Lab Diagnostics grew by 3.5%, with a full-year growth of 7% excluding China [11] - EPD (Established Pharmaceuticals Division) saw a 7% sales increase, with double-digit growth in India and several Latin American and Middle Eastern countries [12] - Medical devices sales grew by 10.5%, driven by a 12% increase in continuous glucose monitors (CGM) and strong performance in electrophysiology and structural heart segments [12][14] Market Data and Key Metrics Changes - The U.S. pediatric nutrition business faced challenges due to a loss of a large WIC contract, leading to a need for volume growth strategies [9] - Core Lab Diagnostics experienced durable demand globally, with growth in markets outside of China [11] - EPD's growth was well-balanced across markets, with significant contributions from emerging markets [12] Company Strategy and Development Direction - The company aims to transition back to a volume-driven growth model in nutrition, with plans to launch at least eight new products in the next 12 months [10] - The acquisition of Exact Sciences is expected to enhance Abbott's position in the cancer diagnostics market, adding a high-growth business to its portfolio [8] - The company is focused on innovation and operational excellence to drive growth in 2026, with a forecast of 7% organic sales growth [8] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the nutrition segment due to price sensitivity among consumers and the need for a sustainable growth model [9][10] - The outlook for 2026 includes expectations of accelerating growth in diagnostics and continued strong performance in cardiovascular and diabetes products [29] - Management expressed confidence in the ability to navigate short-term challenges in nutrition and return to growth in the second half of the year [27] Other Important Information - The company is committed to maintaining a growing dividend and has a strong balance sheet to support future investments [70] - Management emphasized the importance of integrating Exact Sciences post-acquisition and the potential for tuck-in acquisitions in the future [70] Q&A Session Summary Question: Concerns about revenue growth guidance - Management acknowledged a slight reduction in top-line guidance primarily due to challenges in the nutrition business but maintained EPS guidance in line with consensus [23][24] Question: Insights on the electrophysiology (EP) portfolio - Management highlighted the successful launch of Volt and TactiFlex Duo products, positioning Abbott favorably in the EP market with a comprehensive portfolio [34][39] Question: Guidance considerations and risk adjustments - Management discussed the balance of sustaining growth in core segments while addressing short-term challenges in nutrition, with expectations for mid-single-digit growth in diagnostics [42][45] Question: Continuous glucose monitor (CGM) market outlook - Management expressed optimism about CGM growth, projecting continued market expansion and penetration opportunities across various patient groups [52][56] Question: Capital allocation and Exact Sciences acquisition - Management confirmed focus on integrating Exact Sciences and maintaining a strong capital allocation strategy, with no immediate changes to dilution expectations [70][72]