Diversification Still an IssueAside from the weakness in the devices business, Abbott no longer appears as diversified as it should following the AbbVie spin-off. It's certainly impressive that the nutritional business is performing so well, growing at 9% both on a reported and operational basis. However, this means that nutrition now accounts for almost 32% of Abbott's total revenue.
Bottom LineThere are several areas that Abbott's management need to address. However, the stock, which is trading at a P/E of 11, or half that of J&J's, presumes that these obstacles are too much to overcome. Although the stock appears cheap on these metrics, shares are not as attractive based on fiscal 2014 estimates, which pushes the P/E closer to 16. I'm confident that management will execute in the right direction, but logic would suggest that investors stay away until there's more evidence they have things under control. At the time of publication, the author had no position in any of the stocks mentioned. Follow @saintssense
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