Abbott Laboratories

ABT Details

Abbott Laboratories (NYSE: ABT) is engaged in the development, production, and trading of a wide variety of health care products. The company is engaged in 4 types of segment namely, 1) Nutritional Products, global sale extensive line of adult and pediatric nutritional products, 2) Established Pharmaceutical Products, worldwide sale of a broad range of branded pharmaceutical products, 3) Diagnostic Products, the global sale of investigative systems and tests for blood banks, hospitals, commercial laboratories, and testing sites, 4) Medical Devices, international sale of electrophysiology, heart failure, vascular, structural heart, cardiac rhythm management, and diabetes care products, etc. As of April 28th, 2021, the company’s market capitalization stood at USD 215.15 billion.

Introduction of new imaging platform powered by Artificial Intelligence: As of April 26^th 2021, the company announced its new imaging software using the artificial intelligence, Ultreon 1.0, which can help physicians to view inside an artery or blood vessels. This new software will automatically detect the acuteness of calcium-based blockage in the vessel and will help the physicians in solving decision-making steps during the coronary stenting process. Abbott always strives to develop the latest medical technologies so that it can provide the tools to physicians and administrators to provide the utmost level of care for their patients. ABT is planning to launch this software in Europe first and would then seek approval in the U.S. and Japan region.

Robust Q1FY21 Results: The company reported a 35.33% rise in net revenue to USD 10.45 billion in Q1FY21 (ending March 31, 2021) as compared to USD 7.72 billion in Q1FY20 (ending March 31, 2020). The Diagnostic Products segment contributes 38.38%, the Medical Devices segment contributes 31.75%, the Nutritional Products segment contributes 19.47% and the Established Pharmaceutical segment contributes 10.23% to the total revenues in the Q1FY21.  The company reported a massive 217.90% increase in net income to USD 1.79 billion in Q1FY21 as compared to that of USD 0.56 billion in Q1FY20.

Key Risks: As Abbott operates worldwide, it is subjected to numerous government regulations. The procedure of acquiring any regulatory approvals to sell a drug or medical device is both costly and time-consuming. Any delays or failure in approvals of any product might result in a potential revenue loss for the company.

Outlook: The company is expecting its FY21 diluted earnings per share (EPS) from continuing operations under GAAP of around USD 3.74, which reflects the growth of roughly 50% as compared to the previous year i.e., FY20.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ABT Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Stock Recommendation: ABT has already surged 6.30% in the past three months and is currently trading at a higher end of the 52-week range of USD 86.16 to USD 128.54. The stock is currently trading above the 200 DMA levels. We have valued the stock using the EV/EBITDA based relative valuation methodology and arrived at a target price of USD 138.13. Considering the significant rise in the stock price in the past three-month, current market demand for the pharmaceutical products, operating at strong margins, and robust fundamental growth, we recommend a “Buy” rating on the stock at the closing price of USD 121.45, down by 0.21% as of 28^th April 2021.