Abbott is the leading global healthcare company that develops and manufactures a wide range of products and services in nutrition, diagnostics, medical devices, and branded generic pharmaceuticals. Their innovative solutions help millions of people live healthier lives, especially during the Covid 19 Pandemic.
Here are five things I learned from Abbott Q4 2022 earnings call:
- Fourth-quarter sales of $10.1 billion, which were negatively impacted by an expected year-over-year decline in COVID-19 testing-related sales, decreased 12.0% on a reported basis and 6.1% on an organic basis, excluding the impact of foreign exchange
- Excluding COVID-19 testing-related sales, fourth-quarter sales decreased 1.4% on a reported basis and increased 5.4% on an organic basis
- Excluding COVID-19 testing-related sales and U.S. infant formula sales that were impacted by manufacturing disruption, full-year 2022 sales increased 1.9% on a reported basis and 7.4 percent on an organic basis
- GAAP diluted EPS was $0.59 in the fourth quarter, and adjusted diluted EPS was $1.03
- Abbott issues full-year 2023 guidance for diluted EPS from continuing operations on a GAAP basis of $3.05 to $3.25 and full-year adjusted EPS from continuing operations of $4.30 to $4.50.
- Abbott projects full-year 2023 organic sales growth, excluding COVID-19 testing-related sales, of high-single digits4 and COVID-19 testing-related sales of around $2.0 billion
Covid-19 has had a positive impact on Abbott
Since the start of the pandemic, Abbott has delivered nearly 3 billion COVID tests globally. As the virus becomes more endemic, revenue from COVID testing is expected to decline. However, management expects new variants to continue to emerge, and therefore testing will remain an essential part of Abbott’s product portfolio. The company’s COVID testing efforts over the last few years will likely have a positive, long-lasting impact on the company. It has strengthened Abbott’s strategic position in diagnostics by expanding its installed base of instruments and opening new testing channels, such as physician offices and at-home testing. Additionally, the pandemic has further strengthened Abbott’s overall financial health and balance sheet, providing significant strategic flexibility that will allow the company to build and grow even better in the future.
The nutrition segment is expected to recover in 2023
Nutrition sales for Abbott declined by approximately 6% in both the fourth quarter and full year due to disruptions at one of its U.S. infant formula manufacturing facilities. The facility is now operational and prioritizing supply to the WIC (Women, Infants, and Children) federal food assistance program to ensure access for underserved participants. As manufacturing capacity continues to recover, Abbott has increased production of its non-WIC brands, focusing on serving the broader infant formula market and rebuilding inventory levels on retail shelves, which has been progressing well since the fourth quarter. Management expects the overall nutrition business to return to pre-pandemic growth levels of between 4% and 6%.
Management is confident in its forecast-earning guidance
Abbott management is confident in its forecasted earning guidance as many macro factors have improved and stabilized since its last earnings call in October. In previous years, two major factors distorted Abbott’s earnings: the COVID testing business and recalled products. However, these factors are expected to flip next year. With these factors removed, Abbott is projected to grow at a similar rate to its pre-pandemic growth, around high single digits (7% to 8%). Additionally, with upcoming product launches such as Libre 3, Amulet, Aveir, Navitor, CardioMEMS, and Eterna, Abbott management is confident that they will be able to achieve growth at a similar or faster rate than pre-pandemic levels.
Management at Abbott believes that the reopening of China will positively impact the company
Despite the fact that Abbott does not have a large presence in China, it accounts for less than 5% of total Abbott sales. Nonetheless, management believes that reopening in China will have a significant positive spillover effect in other parts of the world, particularly in Asia, particularly Southeast Asia, where Abbott has a strong presence.
Additionally, in terms of value-based pricing implementation in China. Because of its strategy, management believes value-based pricing will benefit Abbott in the medium and long term.