Abbott Reaffirms Commitment To Emerging Markets

BMI View: Abbott Laboratories is a leading exponent of making fixed capital investments in high growth markets such as China. This provides a hedge against currency fluctuations. It demonstrates commitment to the country, which helps from a regulatory standpoint. It also reduces shipping and freight costs.

Abbott Laboratories has raised its earnings guidance following the release of financial results that exceeded expectations. Sales increased by 1.9% to USD5,551mn, while net income decreased by 2.2% to USD466mn. Of the company's four business units, Diagnostics (+4.8%) recorded the highest revenue growth, followed by Nutrition (+1.6%), Medical Devices (+1.2%) and Established Pharmaceuticals (-0.1%). Abbott now expects 2014 earnings per share (EPS) to be USD2.19-2.29, up from USD2.16-2.26.

Emerging Markets Performance

Sales Up, Profit Down
Abbott Laboratories Financial Snapshot (USDmn)

BMI View: Abbott Laboratories is a leading exponent of making fixed capital investments in high growth markets such as China. This provides a hedge against currency fluctuations. It demonstrates commitment to the country, which helps from a regulatory standpoint. It also reduces shipping and freight costs.

Abbott Laboratories has raised its earnings guidance following the release of financial results that exceeded expectations. Sales increased by 1.9% to USD5,551mn, while net income decreased by 2.2% to USD466mn. Of the company's four business units, Diagnostics (+4.8%) recorded the highest revenue growth, followed by Nutrition (+1.6%), Medical Devices (+1.2%) and Established Pharmaceuticals (-0.1%). Abbott now expects 2014 earnings per share (EPS) to be USD2.19-2.29, up from USD2.16-2.26.

Sales Up, Profit Down
Abbott Laboratories Financial Snapshot (USDmn)

Emerging Markets Performance

Through the divestment of its developed markets branded generic pharmaceutical business to Mylan and the acquisitions of Veropharm in Russia and CFR Pharmaceuticals in Chile, Abbott has reaffirmed its commitment to emerging markets. During Q214, the Established Pharmaceuticals business unit demonstrated accelerating revenue growth. This was attributed to an improving operating environment in India, portfolio expansion in Brazil and rebound in activity in China.

Share Price Performance

Abbott's share price has closely matched the performance of the S&P 500 Index since the start of the year. On the day of the release of the company's financial results for Q214, Abbott's share price fell by 0.29%, while the Dow Jones Industrial Average (+0.45%) and the S&P 500 Index (+0.42%) both increased. In June 2014, Abbott declared its 362nd quarterly dividend of USD0.22 per share. The company is a member of the S&P 500 Dividend Aristocrats Index, which tracks companies that have annually increased their dividend for 25 years.

Closely Matched
The Relative Share Price Performance Of Abbott Laboratories And The S&P 500 Index

Recent Developments

July 2014

French drugmaker Sanofi held discussions with Abbott, Mylan and private equity companies TPG and Warburg Pincus over the possible sale of a EUR6.3bn (USD8.5bn) portfolio of mature drugs.

Abbott was to sell its developed market branded generics pharmaceuticals business to Mylan for equity ownership of a newly formed entity that will combine Mylan's existing business and Abbott's developed markets pharmaceuticals business.

Abbott and Fonterra Co-operative Group signed an agreement to develop a dairy farm hub in China.

The Governmental Commission for Control over Foreign Investment postponed a decision on the approval of Abbott's acquisition of Veropharm to its next meeting, according to reports from ITAR-TASS, citing the head of the Federal Antimonopoly Service (FAS) of Russia, Igor Artemyev.

June 2014

Colombia's Superintendency of Industry and Commerce (SIC) formally received a request to integrate Abbott Laboratories Colombia with two Colombian companies: Lafrancol and Synthesis Laboratory.

May 2014

Abbott acquired CFR Pharmaceuticals for USD2.9bn, plus the assumption of net debt of approximately USD430mn.

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Related sectors of this article: Pharmaceuticals & Healthcare
Geography: United States
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