With shares of Abbott Laboratories (NYSE:ABT) trading at around $36.89, is ABT an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock's Movement
Abbott was given an OUTPERFORM rating here on April 2. It has had a good run since, but have circumstances changed?
Abbott operates in four segments: Nutritionals, Medical Devices, Diagnostics, and Established Pharmaceuticals. The biggest selling point for Abbott is an aging population – not just in the United States, but in emerging markets as well. But will that be enough in a difficult economic environment? Let's take a look at some positives and negatives:
Positives:
Highly innovative company Analysts like the stock: 8 Buy, 14 Hold, 1 Sell Established Pharmaceutical sales increased 4.4 percent y-o-y in emerging markets Management expects Established Pharmaceutical sales to grow in double-digits in 2013 Nutritional sales increased 8.7 percent y-o-y Diagnostic sales increased 4.4 percent y-o-y Stock should be resilient in weak markets 1.50 percent dividend yield (lower than peers) FDA approval for TECNIS Toric 1-Piece Intraocular LensNegatives:
Foreign exchange rates hurting bottom line Weak sales in Europe and Japan Medical Device sales declined 4.6 percent y-o-yThe chart below compares fundamentals for Abbott, Medtronic (NYSE:MDT), and CryoLife Inc. (NYSE:CRY). Abbott has a market cap of $58.20 billion, Medtronic has a market cap of $47.65 billion, and CryoLife has a market cap of $158.85 million.
| ABT | MDT | CRY | |
| Trailing P/E | 11.29 | 13.90 | 20.42 |
| Forward P/E | 16.47 | 12.21 | 14.82 |
| Profit Margin | 13.17% | 21.24% | 6.03% |
| ROE | N/A | 19.35% | 6.37% |
| Operating Cash Flow | N/A | $4.74 Billion | $18.99 Million |
| Dividend Yield | 1.50% | 2.20% | 1.70% |
| Short Position | 0.90% | 1.00% | 1.90% |
Let's take a look at some more important numbers prior to forming an opinion on this stock.
E = Equity to Debt Ratio Is Normal
The debt-to-equity ratio for Abbott is weaker than the industry average, but it still qualifies as normal.
| Debt-To-Equity | Cash | Long-Term Debt | |
| ABT | 0.76 | $15.17 Billion | $20.48 Billion |
| MDT | 0.64 | $2.46 Billion | $11.49 Billion |
| CRY | 0.00 | $13.01 Million | $0 |
T = Technicals Are Strong
Abbott hasn't been around long on its own, but the performance year-to-date has been good. In a normal market, it would be considered a great performance. In the current market environment, it's seen as ho-hum.
| 1 Month | Year-To-Date | 1 Year | 3 Year | |
| ABT | 4.84% | 18.65% | 28.22% | 80.74% |
| MDT | -0.11% | 14.35% | 25.12% | 15.14% |
| CRY | -5.82% | -8.77% | 8.35% | N/A |
At $36.89, Abbott is trading above all its averages.
| 50-Day SMA | 35.35 |
| 100-Day SMA | 34.03 |
| 200-Day SMA | 32.93 |
E = Earnings Have Been Steady
Earnings have been steady on an annual basis, but it's a different company now. Keep that in mind when looking at the numbers below.
| 2008 | 2009 | 2010 | 2011 | 2012 | |
| Revenue ($)in billions | 29.53 | 30.76 | 35.17 | 38.85 | 39.87 |
| Diluted EPS ($) | 3.12 | 3.69 | 2.96 | 3.01 | 3.72 |
When we look at the previous quarter on a year-over-year basis, we see a decline in revenue and earnings, but these numbers as a whole don't reflect the current situation. Once again, it's not the same company after the spinoff.
| 3/2012 | 6/2012 | 9/2012 | 12/2012 | 3/2013 | |
| Revenue ($)in billions | 9.46 | 9.81 | 9.77 | 10.84 | 5.38 |
| Diluted EPS ($) | 0.78 | 1.08 | 1.21 | 0.66 | 0.34 |
Now let's take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?
T = Trends Support the Industry
With baby boomers retiring in droves, the industry stands to benefit. Income-oriented stocks have also been hot. This doesn't mean the industry is bulletproof by any means, but it should be more resilient than most industries when the stock market eventually comes back down to reality.
Conclusion
Abbott is an innovative, diversified, and well-managed company with a decent dividend. That combination is difficult to find.
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