Abbott Laboratories (ABT) shares have shown signs of recovery over the past three months. This trend has been steady while most of the broader market has continued to decline on geopolitical tensions and an imminent sharp rise in interest rates.
Based in Chicago, Illinois, Abbott Labs qualifies as a diagnostics and medical devices giant in the global healthcare system. The portfolio, which also includes established pharmaceutical and nutritional products, holds leading market positions across more than 160 countries worldwide.
Q4 2021 Results
The final three months of 2021 were a strong quarter for Abbott Laboratories, as total reported revenues rose 7.5% year-over-year to $11.5 billion, beating analysts’ median forecast by $790 million.
The company also outperformed analysts’ consensus estimates on adjusted earnings per share, reporting $1.32 versus the expected $1.18.
Abbott said that for the full year 2022, adjusted diluted earnings from continuing operations should not be less than $4.70 per share versus the median consensus estimate of $4.78.
Financial Condition
The company’s financial position is rock solid. The Interest Coverage Ratio of 15.8 means interest costs on all outstanding debt will be paid on time, while the Altman Z-Score of 4.91 indicates that the firm is in a safe zone.
This healthy balance sheet allowed stockholders to receive their 392nd consecutive quarterly dividend payment of $0.47 per share on February 15, resulting in a future annual dividend yield of 1.56% as of this writing, compared to the lower S&P500 dividend yield of 1.37%.
Abbott has increased its dividend payout for 50 straight years and recently at a much faster pace than the broader market. That score earns the stock a place in the S&P 500 Dividend Aristocrats Index.
Unprecedented Performance, a Robust Portfolio and the Arrival of a Strong Revenue Generator
The strong business trends of this giant of diagnostic tools and medical devices are not new to investors. Over the past 50 years, alongside steady dividend increases, Abbott shareholders have seen the stock’s share price rise rapidly, outperforming the benchmark S&P 500 index (SPX) by more than five times.
This is due in part by the company’s portfolio, an arsenal of top-notch products, which ensured its competition was never a cause for concern. Since few competitors were truly up to the task, Abbott was able to amass large sums of capital to reinvest in continued growth, in addition to paying the dividends that have boosted the stock’s legitimacy.
Though its Diagnostics and Medical Devices segments are established revenue streams, Abbott is also strong across its other businesses.
On top of this, the global health emergency in early 2020 provided the company with an excellent opportunity to significantly increase sales. There’s now talk of an additional percentage of sales, well above 5% of analysts’ overall forecast for all of 2022, that Abbott is expected to generate from testing to detect the COVID-19 viral infection.
As the tide turned from eradicating the virus to living alongside it, as is the case with seasonal flu, society will need abundant testing instruments for a prolonged period of time.
Wall Street’s Take
Over the past three months, ten Wall Street analysts have issued a 12-month price target for ABT. The company has a Strong Buy consensus rating based on nine Buy ratings, and one Hold rating. The average Abbott Labs price target is $144.30, implying an 18.85% upside potential.
Conclusion
Despite the war in Ukraine and well-known fears of high inflation and the next Fed rate hike, expectations for continued revenue from testing for the COVID-19 virus are driving Abbott’s recovery. The company has an enviable dividend history and a portfolio of top-quality products, while the global health outlook is quite favorable. This is a stock to consider keeping in your portfolio for the foreseeable future.
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