Abbott Laboratories (ABT) reported third quarter earnings of $1.05 per share, a penny above the Zacks Consensus Estimate and towards the higher end of the guidance provided by the company. Earnings increased 14.1% from the year-earlier period. However, including one-time items, EPS declined 40% to 57 cents.
Although revenues grew 11.8% to $8.7 billion, they fell short of the Zacks Consensus Estimate of $8.9 billion. Revenues were negatively impacted by foreign exchange (Fx) fluctuations (1.0%) as well as the recall of the infant product Similac in September.
Performance by Segment
Pharmaceutical division sales were $4,937 million, up 21.7% (including a 1.6% negative Fx impact). Strong Humira and lipid franchise sales were offset by the weak performance of Kaletra, which declined 7.2% to $328 million. Pharmaceutical revenues included sales from the Solvay acquisition that closed in mid-February 2010.
The lipid franchise posted sales of $629 million during the quarter with TriCor/TriLipix sales increasing 22.1%. Meanwhile, Humira recorded sales growth in both the US (8.1%) and international markets (16.6%) during the quarter. The company reported that growth trends in the international anti-TNF market remained strong, with Humira maintaining a leading share in several markets.
Third quarter Humira sales increased 12.6% to $1.7 billion. Abbott Labs is working on expanding Humira’s label and is also seeking US and European approval of ABT-874 for the treatment of psoriasis.
The Nutritional business posted third quarter sales of $1,365 million, down 1.5%. Sales were impacted by the September 2010 recall of infant formula product Similac. Pediatric nutritional sales were down 9.3% during the quarter. Results were also impacted by tough year-over-year comparisons in international markets due to new product launches that occurred in the third quarter of 2009.
Abbott Diagnostics posted sales of $916 million in the quarter, representing an increase of just 0.8%. Meanwhile, the Vascular division continued to perform well, with sales increasing 18.6% to $790 million, thanks to strong growth in international markets. XIENCE V and XIENCE PRIME should continue performing well in Japan and Europe. Other division sales totaled $667 million, down 10.6%.
Abbott Labs Narrows EPS Guidance Range
Following the release of third quarter results, management raised the lower end of their previously issued 2010 earnings guidance by 3 cents. Abbott Labs now expects to deliver earnings in the range of $4.16 – $4.18 per share, representing double-digit growth. The Zacks Consensus Estimate currently stands at $4.16.
Abbott Labs also provided an update on its pipeline. The company stated that it expects to gain approval for 75 new products or additional indications in the next five years. Abbott Labs is working on boosting its vascular products portfolio and expects to launch several products in the next five years. These include the potential US launches of MitraClip, XIENCE PRIME and XIENCE Nano.
Meanwhile, the recent acquisition of Facet Biotech has helped strengthen Abbott Labs’ early- and mid-stage oncology portfolio. Abbott Labs is also working on strengthening its neuroscience portfolio and has several candidates in different stages of development for the treatment of diseases like schizophrenia, Alzheimer’s and multiple sclerosis. Abbott Labs, along with partner Biogen (BIIB), recently moved daclizumab into a phase III study for the treatment of relapsing-remitting multiple sclerosis (RRMS).
Neutral on Abbott Labs
We currently have a Neutral recommendation on Abbott Labs, which is supported by a Zacks #3 Rank (short-term Hold rating). Abbott Labs’ strong business segments, contributions from recent acquisitions and impressive late-stage pipeline should help fortify long-term earnings growth. Lead product, Humira, will continue to be a huge driver of growth for years to come.
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