This Top-Rated Healthcare Stock Is Trading at a 25% Discount

With a $185.97 billion market cap., Abbott Laboratories (ABT) discovers, develops, manufactures, and sells health care products internationally. The company operates in four segments: Established Pharmaceutical Products; Diagnostic Products; Nutritional Products; and Medical Devices.

The company continues to strengthen its portfolio with new product approvals and expanded reimbursement coverage. On June 3, ABT announced the development of a new bio wearable that will continuously monitor glucose and ketone levels in one sensor. The system has secured breakthrough device designation from the U.S. Food and Drug Administration (FDA).

“We're designing our glucose-ketone monitoring system with superior sensing technology that will pair with industry-leading insulin pumps to create a best-in-class solution. We're optimistic that this will be a breakthrough for people with diabetes, especially those at risk of developing diabetic ketoacidosis,” said Jared Watkin, Senior Vice President of ABT’s diabetes care business.

In addition, on May 31, the company’s first and only continuous glucose monitoring (CGM) system, FreeStyle Libre 3 system, received U.S. FDA clearance. “Abbott revolutionized diabetes care with FreeStyle Libre® technology, which is the number one continuous glucose monitor used by 4 million people around the world,” Jared Watkin added.

However, ABT’s shares have declined 24.5% year-to-date to close the last trading session at $106.21. It is currently trading 25.5% below its 52-week high of $142.60, which it hit on December 27, 2021. The recent market volatility has contributed to the stock’s sharp decline. Thus, the current dip in price makes it a good buy.

Here is what could influence the performance of ABT in the upcoming months:

Robust Financials

ABT's net sales increased 13.8% year-over-year to $4.99 billion in the fiscal 2022 first quarter ended March 31, 2022. The company’s adjusted gross margin amounted to $7.03 billion, up 15.4% year-over-year. Its adjusted earnings before taxes grew 29.2% year-over-year to $3.60 billion.

Furthermore, the company’s adjusted net earnings and adjusted earnings per share came in at $3.08 billion and $1.73, registering increases of 29.9% and 31.1%, respectively, from the prior-year period.

Favorable Analyst Estimates

Analysts expect ABT's revenue for the fiscal 2022 second quarter (ending June 2022) to come in at $10.25 billion, representing a rise of 5.7% from the same period in 2021. Also, Street expects the company's EPS to grow at a CAGR of 12.6% over the next five years.

The company has an impressive earnings history as it has surpassed the consensus EPS estimates in each of the trailing four quarters.

High Profitability

ABT’s trailing-12-month gross profit margin of 58.10% is 5.6% higher than the 55.04% industry average. And its trailing-12-month EBIT margin of 22.58% is 2,198.2% higher than the 0.98% industry average. Furthermore, the company’s trailing-12-month EBITDA margin of 30.28% is 667.9% higher than the industry average of 3.94%.

Consensus Rating and Price Target Indicate Potential Upside

Of the nine Wall Street analysts that rated ABT, eight rated it Buy, while one rated it Hold. The 12-month median price target of $140.00 indicates a 31.8% potential upside from yesterday’s closing price of $106.21. The price targets range from a low of $125.00 to a high of $150.00.

POWR Ratings Show Promise

ABT has an overall A rating, equating to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree. 

ABT has a grade of A for Growth, consistent with its revenue and earnings growth estimates. In addition, the stock has a B grade for Quality, which is in sync with its higher-than-industry profitability ratios.

ABT is ranked #2 out of 147 stocks in the Medical - Devices & Equipment industry.

Beyond what I have stated above, we have also given ABT grades for Sentiment, Momentum, Value, and Stability. Get access to all the ABT ratings here.

Bottom Line

ABT reported strong financial results for the fiscal 2022 first quarter and asserted continued growth for full-year 2022. Furthermore, the company is well-positioned to benefit from its diversified product portfolio.

“Our diversified business continues to perform well in a challenging environment. We're particularly pleased with the strong performance we're achieving in Medical Devices and Established Pharmaceuticals,” said Robert B. Ford, ABT’s Chairman, and CEO.

So, it could be wise to invest in the stock now.

How Does Abbott Laboratories (ABT) Stack Up Against its Peers?

ABT has an overall POWR Rating of A. One could also check out these other stocks within the Medical - Devices & Equipment industry with an A (Strong Buy) rating: Olympus Corp. ADR (OCPNY), Fonar Corporation (FONR), and Electromed, Inc. (ELMD).

ABT shares were unchanged in premarket trading Friday. Year-to-date, ABT has declined -23.97%, versus a -19.81% rise in the benchmark S&P 500 index during the same period.

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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