This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Abbott Labs Has Fallen and It Can't Get Up

NEW YORK (TheStreet) -- The one-year anniversary of Abbott Labs (ABT - Get Report) spinning off its drug business into a new entity called AbbVie (ABBV) has come and gone. There's not much to celebrate.

Investors cheered when management first announced the spinoff back in 2011 because they believed  the remaining portion of Abbott -- the devices business -- would post stronger growth.

That never happened, although Abbott shares are up 2.8% for the year to date as of Wednesday's close of $39.39, compared with a 0.2% decline in the Standard & Poor's 500 for the same period.

The outcome of the split generated concerns and raised questions as to whether management had a strong grasp on the company. It's true that the nutrition business was performing well. But the devices segment, Abbott's largest division, was posting mediocre results.

Making matters worse, sales from Abbott's established pharmaceuticals (or branded generics) were on the downtrend. It was two-step dance going in circles. All told, the value creation investors hoped for when the split occurred didn't happen.

In fairness to management, I believe expectations were always too high. But they did nothing to downplay the potential. And after taking some time to study the company's fourth quarter earnings results, I'm not ready to say that a lot has changed.

The 1% revenue growth can't be seen as anything other than a disappointment. Even though this was slightly better by 2% on a constant currency basis, revenue still fell short of estimates. Essentially, as with the October quarter, Abbott failed to meet the Street's growth projections.

Management offered some compelling reasons for the disappointment. Among other things, management cited the impact of the Fonterra recall. Fonterra is a dairy maker that found traces of bacteria that may lead to botulism. As precaution, Abbott initiated the recall last year. So it's understandable that international growth was somewhat lackluster.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Submit an article to us!
SYM TRADE IT LAST %CHG
ABT $46.69 0.00%
AAPL $128.95 0.00%
FB $78.99 0.00%
GOOG $537.90 0.00%
TSLA $226.03 0.00%

Markets

DOW 18,024.06 +183.54 1.03%
S&P 500 2,108.29 +22.78 1.09%
NASDAQ 5,005.3910 +63.9670 1.29%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs