Will Abbott’s stock rise after Q4 results?

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Abbott (NYSE: ABT) is expected to report its fourth quarter 2022 results on Wednesday, January 25. We expect the company to post sales and earnings slightly above street expectations. Supply chain disruptions, forex headwinds and a drop in Covid-19 demand are likely to weigh on the company’s overall performance. While we expect Abbott to post positive results in the fourth quarter, our forecast indicates that ABT stock is priced correctly, as discussed below. Our interactive dashboard analysis of Abbott Earnings Example has additional details.

(1) Revenue is expected to be slightly above consensus estimates

  • Trefis estimates Abbott’s fourth quarter 2022 revenues at approximately $9.7 billion, down 16% yoy and slightly above the consensus estimate of $9.6 billion.
  • The drop in revenue can mainly be attributed to lower demand for Covid-19 testing and forex headwinds.
  • For perspective, Abbott expects total covid-19-related revenue of $500 million in Q4, compared to $2.3 billion in the same quarter last year.
  • Looking at the third quarter, the company reported total sales of $10.4 billion, down 4.7% year-on-year, due to lower sales for medical devices, nutrition and diagnostics.
  • Our dashboard on Abbott Earnings provides more details about the company’s segments.

(2) EPS will likely be above consensus estimates

  • Abbott’s fourth quarter 2022 adjusted earnings per share (EPS) is expected to be $0.99 per Trefis analysis, well above the consensus estimate of $0.91.
  • Abbott’s adjusted net income of $2.0 billion in the third quarter of 2022 reflected a 19% decline from the $2.5 billion figure in the same quarter last year. This can be attributed to lower revenues and a gross margin contraction of almost 300 basis points due to higher costs.
  • For the full year 2023, we expect adjusted earnings per share to be lower at $4.60, compared to $5.24 in 2021 and an estimated $5.30 in 2022. This can be attributed to an expected decline in sales related to Covid-19.

(3) ABT shares look reasonably valued

  • We estimate Abbott’s appreciation about $118 per share, about 3% above the current market price of $114.
  • At current levels, ABT stock trades at a forward P/E multiple of 25x based on our 2023 earnings per share estimate of $4.60, compared to the last three-year average of 24x, implying that it ABT share is fully valued.
  • If the company reports optimistic Q4 results and offers a better 2023 outlook than street estimates, the P/E multiple will likely be revised upwards, resulting in higher levels for ABT shares.

While ABT shares look well priced, it’s helpful to see how Abbott’s colleagues rate on metrics that matter. Other valuable comparisons for companies in different industries can be found at Peer comparisons.

In addition, the Covid-19 crisis has led to many price discontinuities which can provide attractive trading opportunities. For example, you’d be surprised how counterintuitive stock valuation is Cintas v Merck.

With inflation rising and the Fed raising rates, among other things, ABT’s stock is down 8% over the past 12 months. Can it go down even more? See how low Abbott stock can go by comparing its fall to past market crashes. Here’s a performance summary of all stocks in previous market crashes.

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