Tags: Abbott | Labs | growth | ABT

Abbott Labs: Growth and Income Double Play

Monday, 06 Feb 2012 08:05 AM

By Constance Gustke

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Diversified healthcare player Abbott Labs (ABT) is a solid double play for growth and income investors. Its strong product portfolio feeds sales, fueling steady dividend increases.

All of Abbott’s key businesses are growing. Pharmaceuticals account for more than half of sales. Abbott prospers from blockbuster drugs such as Humira, which treats rheumatoid arthritis and whose record sales climbed 15.9 percent last year. Abbott also makes nutritional, diagnostic and vascular products.

A global player, Abbott generates more than half of its sales outside the United States. For the fourth quarter of 2011, Abbott reported total sales of $10.4 billion, up 4.1 percent from 2010.

Net income was $1.45 per share, up 11.5 percent. Full-year sales rose 10.5 percent to $38.9 billion, versus $35.2 billion a year ago.

In 2011, earnings were $4.66 per share, up 11.8 percent. The 2012 Wall Street earnings estimate for Abbott is $5.01 per share.

Despite rosy numbers, Abbott isn’t sitting still. Its fat pipeline includes more than 20 compounds, including treatments for schizophrenia and hepatitis C. Abbott also plans to split into two companies by the end of 2012.

The fast-growing medical unit will keep the Abbott name; the pharmaceutical unit will be spun out separately. This split-up will likely result in higher valuations for each, adds S&P.

Growing dividend, earnings


Abbott is a solid long-term play. It has increased its dividend, currently 3.5 percent, for 39 years. And the company is buying back shares this year.

S&P analysts have a buy rating on Abbott, citing its significant pharmaceutical and medical device launches and strong balance sheet. They have a target price of $61.

The company next reports on April 19.

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