Abbott recently reported its Q1 results, which saw revenue above expectations at $10 billion and earnings at $0.98 per share. The company’s stock performance has been lackluster, with little change over the past few years compared to the S&P 500 index. Despite underperforming the index in 2022 and 2023, Abbott’s stock has room for growth, with an estimated valuation of $123 per share, indicating a potential upside of over 15% from its current levels.
The company’s revenue in Q1 was up 2.2% year-over-year, with strong growth in its medical devices segment, while diagnostics sales trended lower due to decreased demand for COVID-19 testing. Abbott expects its total 2024 revenue to rise 8.5% to 10% organically. However, the decline in adjusted pre-tax income margin led to a 5% fall in the bottom line to $0.98 on an adjusted basis. Despite upbeat results, the stock has declined around 5% in the last five days, indicating potential for future growth.
Consistently beating the S&P 500 index has been challenging for individual stocks in recent years, including heavyweights in the health care sector and megacap stars. The Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the index each year over the same period, providing better returns with less risk. It remains to be seen if Abbott will face a similar situation as in 2022 and 2023 or see a strong jump in performance in the next 12 months.
From a valuation perspective, Abbott’s stock has room for growth, trading at a little under 23x forward earnings compared to the 25x average over the last three years. The company has narrowed its adjusted earnings per share guidance from $4.50 to $4.70 earlier to $4.55 to $4.70 now. Despite the decline in margins, Abbott’s peers’ comparison indicates potential for growth in the stock and positive outlook for the company in the coming months.
Overall, Abbott’s Q1 results were positive, with strong revenue growth in its medical devices and nutrition segments offsetting lower diagnostics sales. While the stock has underperformed in recent years, there is potential for growth based on valuation and peer comparisons. With an estimated upside of over 15% from its current levels, Abbott remains an attractive investment opportunity for investors looking for growth in the health care sector.
