Opinion on  Abbott Laboratories (ABT)     Sector: Healthcare  >  Industry: Major Drugs
Healthy Growth for Abbott Labs

Abbott Labs (NYSE: ABT) posted better than expected earnings and sales growth and raised its guidance this morning, reflected in the above 1-year stock chart which shows the Company has outperformed the S&P 500 index by over 30% and the Healthcare Sector SPDR exchange-traded fund (XLV) by over 20%. Results included the following:

-global sales growth of 14.8% to $7.3 billion (B)

-pharmaceutical sales ($4.1B) growth of 16.7% led by Humira (a biological agent for autoimmune diseases such as rheumatoid arthritis), which experienced a 48% growth in sales for 1H08 at $1.1B with a forecast for sales of $4.3 billion for 2008

-medical product sales ($1.4B) growth of 14.7% driven by diagnostics sales ($0.9B) growth over 17%

-nutritional sales ($1.2B) growth of 21.3% thanks to strong results in emerging markets

Abbott Labs reported total sales for the first half of 2008 of $14.1B with $6.5B in the USA and $7.6B internationally. The Company posted a diversified mix of healthcare business units with 56.5% of sales from prescription drugs, 16.5% from nutrional products, 12.5% from diagnostics, and about 6.5% from vascular products such as stents. The Company increased its earnings-per-share guidance from a range of $3.20 - $3.25 to $3.24 - $3.28, excluding specified items, reflecting growth of about 15% along with expected sales growth in the mid-teens for the full year.

Abbott Labs is trading at less than 18X its 2008 earnings guidance with a 2.6% dividend yield, resulting in a price-earnings to growth ratio of just 1.2X. Given a healthy mix of business units and geographical diversification, Abbott Labs is poised to break through all-time highs over the $60 level, which was reached earlier this year.