Abbott Labs (ABT) Guidance To Reflect Tariffs Impact

$Abbott Laboratories(ABT)$ is expected to release its fiscal Q1 2025 quarterly earnings result on 16 April 2025 before the market open.

The revenues are forecasted to come in at $10.42 billion, which would be an increase of 4.5% compared to the same period one year ago.

The consensus estimate for the earnings per share is expected to come in at an increase of 9.2% compared to same period last year, $1.07 per share.

Abbott Labs (ABT) Last Positive Earnings Call Saw 9.56% Sharee Price Increase

Abbott had a positive earnings call on 22 Jan 2025 which saw its share price increase by 9.56% since.

The earnings call highlighted strong growth across several segments, particularly in medical devices and adult nutrition, alongside effective financial management and strategic guidance for 2025. However, challenges such as foreign exchange impacts, market dynamics in China, and an increased tax rate were noted.

Abbott Labs (ABT) Guidance

During Abbott's Fourth Quarter 2024 Earnings Conference Call, the guidance for 2025 included expectations for robust growth across various metrics. Abbott forecasted organic sales growth to range between 7.5% and 8.5%, aiming for adjusted earnings per share (EPS) between $5.05 and $5.25, reflecting double-digit growth at the midpoint. The company outlined significant achievements in 2024, such as a 9.5% sales growth excluding COVID testing, a 70 basis point improvement in gross margins, and generating $8.5 billion in operating cash flow. For 2025, Abbott anticipates further expansion in its gross margin profile to around 57% of sales and an improvement in its adjusted operating margin profile by 150 basis points, driven by a combination of gross margin expansion and operating margin leverage. The adjusted tax rate is expected to increase to a range of 16% to 17% due to the adoption of the Pillar 2 tax framework.

Abbott also highlighted strong performance across its business segments, including Nutrition, Diagnostics, and Medical Devices, and emphasized its commitment to innovation and operational excellence to sustain growth momentum.

Key Factors Influencing Abbott Labs (ABT) Q1 2025 Earnings

Core Business Segments

Medical Devices: Abbott’s FreeStyle Libre (continuous glucose monitoring) is a major growth driver. By 2025, adoption in diabetes care and potential expansions into new markets (e.g., Asia-Pacific) could drive revenue.

Diagnostics: Reduced reliance on COVID-19 testing revenue by 2025, but growth in routine diagnostics (e.g., Alinity systems) and emerging infectious disease testing may offset declines.

Achieved sales growth of 9.5% excluding COVID testing, with significant contributions from adult nutrition and medical devices. Fourth quarter sales grew 10%, excluding COVID testing sales.

Nutrition: Pediatric nutrition (e.g., Similac) and adult health products (e.g., Ensure) face competition but could benefit from innovation in specialized formulations or global market penetration.

Pharmaceuticals: Branded generics in emerging markets (e.g., India, Latin America) may see steady growth if pricing pressures remain manageable.

This segment would be watched closely as there might be some impact from the tariffs turbulence.

Innovation & Pipeline

New product launches, such as next-gen glucose monitors, structural heart devices (e.g., MitraClip), or neuromodulation tech, could boost margins.

R&D investments in areas like wearable diagnostics or AI-driven health tools may begin contributing to revenue by 2025.

Regulatory & Macro Environment

FDA approvals for pipeline products and regulatory clarity on AI/software-based medical devices.

Inflationary pressures on supply chains and labor costs, mitigated by operational efficiency programs.

Currency headwinds/tailwinds from USD fluctuations, given ~40% of revenue comes from international markets. The U.S. dollar's strength had an unfavorable impact of 1.4% on fourth quarter sales, affecting overall sales comparisons.

Competitive Landscape

Rivalry in diabetes care (Dexcom, Medtronic) and diagnostics (Roche, Siemens Healthineers) may pressure pricing. Core Laboratory Diagnostics growth was impacted by challenging market dynamics in China, with double-digit growth in other markets.

Abbott’s scale and diversified portfolio could provide resilience compared to single-product competitors.

Potential Earnings Catalysts

Medical Device Momentum: Continued double-digit growth in FreeStyle Libre sales (projected to exceed $10B annually by 2025).

Medical Devices sales grew 14%, with notable growth in Diabetes Care (23%), Structural Heart (23%), and Electrophysiology (9%).

Margin Expansion: Cost-cutting initiatives (e.g., manufacturing automation) and mix shift toward higher-margin devices. The adjusted tax rate for 2025 is expected to increase to 16% to 17% due to the adoption of the Pillar 2 tax framework.

Forecasted organic sales growth of 7.5% to 8.5% for 2025, with adjusted earnings per share expected to be in the range of $5.05 to $5.25, indicating double-digit growth at the midpoint.

Emerging Markets Growth: Rising healthcare spending in regions like India and Latin America for diagnostics and nutrition.

Shareholder Returns: Consistent dividend hikes (50+ years of increases) and buybacks supporting EPS growth.

Generated $8.5 billion of operating cash flow, which supported reinvestment in the business, debt repayment, and $5 billion returned to shareholders.

Risks to Monitor

Supply Chain Disruptions: Semiconductor shortages or logistics delays impacting device production.

Litigation: Ongoing lawsuits (e.g., infant formula recalls) could result in settlements affecting earnings.

Reimbursement Pressures: Medicare/Medicaid policy changes or international pricing controls.

Economic Slowdown: Reduced elective procedure volumes (impacting devices) or consumer spending on nutrition products.

Abbott Labs (ABT) Price Target

Based on 16 Wall Street analysts offering 12 month price targets for Abbott Labs in the last 3 months. The average price target is $140.21 with a high forecast of $158.00 and a low forecast of $117.00. The average price target represents a 9.57% change from the last price of $127.96.

Management may reaffirm full-year 2025 targets, emphasizing device innovation and emerging markets, but might share some updates on how they are going to navigate the tariff impact.

ABT trades at ~25x forward P/E (2025), a premium to peers, justified by its diversified growth and dividend aristocrat status.

One area we as investors could look out is the dividend safety where the payout ratio (~50%) and strong cash flow ($7B+ annually) support reliable dividends. Abbott’s sustainability initiatives (e.g., carbon-neutral operations) may attract ESG-focused investors.

Technical Analysis - Exponential Moving Average (EMA)

From the technicals, we are seeing some good momentum formed from the RSI, and the bulls are making a daily uptrend despite the tariff fear on pharma sector, and we are seeing a convergence on the 12-EMA and 26-EMA, I think the bulls might continue the daily uptrend expansion.

If the bulls succeed and the earnings gave a positive guidance and positive earnings, we could see ABT reaching above the 12-EMA and 50-EMA to go back to the highs seen in February 2025.

Summary

Abbott Laboratories is poised for steady growth in Q1 2025, anchored by its medical device dominance and diagnostics resilience. While risks like regulatory hurdles and competition persist, its diversified portfolio and innovation pipeline provide a buffer.

Here are some areas I think we might need to watch out for :

1. FreeStyle Libre adoption rates and new product launches.

2. Margin performance amid cost inflation.

3. Management commentary on emerging market strategies.

Appreciate if you could share your thoughts in the comment section whether you think Abbott would be able to navigate the tariffs on pharmaceuticals with its other business segment growth.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.