Wednesday, 16 October 2013

Abbott Laboratories Q3 2013 Results

Abbott announced this morning a 57% increase in its dividend, demonstrating confidence in the long-term growth of the company and their commitment to increasing shareholder returns. This declaration increases the company’s quarterly dividend to $0.22 per share from $0.14 a share, effective with the dividend to be paid in February 2014.

Total company sales increased 4.3%, operationally, but excluding the sales disruption in International Nutrition, sales would have increased approximately 6%. Sales growth in International Nutrition was affected by the supplier recall initiated in early August in China and two other markets for certain pediatric nutritional products.

Diagnostics delivered double-digit growth and Medical Devices delivered nearly 4% growth with double-digit growth in Medical Optics. Abbott again saw a strong growth in emerging markets and also began to see better performance in developed markets.

Diagnostics, one of Abbott’s most durable growth businesses, increased more than 6% in developed markets with double-digit growth in point-of-care and strong growth in U.S. Core Laboratory Diagnostics, driven by several large customer account wins.

Medical Optics, also contributed to the company’s improvement in developed markets, growth of Cataract business has accelerated over the last three quarters, driven by new product launches, including the TECNIS Toric in the U.S. and TECNIS OptiBlue in Japan.

In Established Pharmaceuticals this quarter, sales increased modestly. While recent macroeconomic and market pressures in certain emerging markets resulted in somewhat lower sales growth this quarter, growth rates in emerging markets have been and are expected to continue to be higher than the growth rates of the developed world of the overall global economy.

Established Pharmaceuticals remains well aligned with the fundamentals driving long-term growth in emerging markets, rising middle-class, improving access to healthcare consumers that are seeking and willing to pay for high-quality brands. Emerging markets projected drive, 70% of the global pharmaceutical growth over the next several years, the majority of that growth will be from branded generics.

Sales increased 4.3% on an operational basis that is excluding an unfavorable 2.3% impact from foreign exchange. The sales disruption in Abbott’s International Nutrition business is estimated to have reduced its worldwide sales growth by nearly 2%. So sales would have increased around 6% without this event.

Outlook for the Full Year 2013:

Today Abbott confirmed its ongoing full year earnings per share guidance range of about $1.98 to $2.04 reflecting double-digit growth. Based on current exchange rates, the company would expect exchange to have a negative impact of around 2% on full year reported sales. This would result in reported sales growth in the low single digits. The company forecast an ongoing adjusted gross margin ratio for the full year of approximately 55.5% percent of sales, ongoing R&D at around 6.5% of sales and ongoing SG&A expense of somewhat more than 30% of sales.

Abbott also forecast the full year net interest expense of approximately $100 million, non-operating income of around $50 million and around $40 million of expense on the exchange gain/loss line. As previously indicated, the company forecast the full year ongoing tax rate of 19%.

Outlook for the Fourth Quarter of 2013:

Operational sales growth is expected to be in the low-to-mid single digits, which includes the impact of the Nutrition disruptions. At current exchange rates, the company would expect roughly 3% negative impact from exchange and forecast an ongoing adjusted gross margin ratio in the fourth quarter of approximately 55.5% of sales. Abbott also forecast an ongoing tax rate of 19% for the fourth quarter, in line with the year-to-date rate.

Lastly, similar to the third quarter, the company expects the recent sales disruption in its International Nutrition business to impact ongoing earnings per share by approximately $0.05 in the fourth quarter, which is factored into the company’s forecast.

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