The medical devices business, where Abbott competes head-on with Johnson & Johnson, continues to struggle, registering no growth whatsoever. By contrast, Johnson & Johnson posted 12% growth in devices. I'm not going to bore you with details here about Johnson & Johnson's organic vs. non-organic growth.
I've already written about it at length
. But suffice it to say, even on an organic basis, Johnson & Johnson's 2% growth still outperformed Abbott.
Here again, for Abbott, it's a familiar dance. While the company does show solid improvements and strong momentum in its nutrition business, it's hard to recommend the stock, especially when the devices business, Abbott's largest division, is posting mediocre results. Meanwhile, revenue in Established Pharmaceuticals, or what the company calls "branded generics," was down 2% (as reported).
I pointed out earlier that the nutrition business now accounts for 31% of Abbott's total revenue. While it's certainly a good thing that the nutrition business happens to be performing so well, from a diversification perspective, relying so heavily on one segment points to a potential weakness in the company's business.
I'm not suggestion that the growth in nutrition is due for an abrupt end. But it makes for some restless nights, especially since -- despite the strong growth -- gross margin still declines by almost 1% year over year. It still looks as if management is trying to sort out the remnants of the recent AbbVie separation.
To that end, I'm willing to give Abbott some more time. But until more progress is made and Abbott become more balanced, I don't see how this stock makes sense at this level.
At the time of publication, the author held no position in any of the stocks mentioned
This article was written by an independent contributor, separate from TheStreet's regular news coverage.