Abbott Laboratories Receives Positive Initiation from Piper Sandler

Piper Sandler's Initiation of Coverage on Abbott Laboratories

Piper Sandler has launched its coverage on Abbott Laboratories (NYSE: ABT) with an 'overweight' rating and a price target of $131 per share. This comes as a significant endorsement for Abbott amid a dynamic market landscape.

Financial Health and Growth Forecasts

Central to Piper Sandler's recommendation is Abbott's robust financial position and promising growth trajectory. The analysts project Abbott’s revenues to increase from $41.68 billion in 2024 to approximately $44.84 billion by 2025, which translates to a 7.6% growth rate. This increase is complemented by double-digit earnings per share (EPS) growth, expected to rise from $4.65 in 2024 to $5.14 in 2025, marking an impressive increase of 10.5%.

Continued Momentum in EPS

Piper Sandler estimates that Abbott’s EPS will further escalate to $5.74 by 2026, reflecting a sustained growth rate of 11.7%. At its current valuation of around $114.88, the stock is seen as an appealing entry point, especially with an estimated price-to-earnings ratio of 22.3x for 2025, according to the analysts.

Strength in Medical Technology Segment

The medical technology division of Abbott, which constitutes roughly 44% of total revenue excluding COVID-19 testing, is expected to be a key driver of growth. The firm anticipates this segment will experience double-digit growth through 2026, fueled by innovative products like the FreeStyle Libre continuous glucose monitoring device and MitraClip for structural heart therapy.

Innovation Pipeline and Future Products

Piper Sandler has commendably highlighted Abbott’s robust innovation pipeline, brimming with new products and technological enhancements. Among the most notable upcoming products are the Lingo CGM, targeting the wellness segment, and the anticipated Volt pulsed field ablation (PFA) catheter expected to roll out in 2026.

Analyzing Risks and Market Position

A vital aspect of Piper Sandler’s positive outlook on Abbott hinges on its capacity to sustain double-digit EPS growth, particularly moving past abrupt changes in revenue due to the pandemic. Market analysts believe that Abbott will emerge strongly from 2024, with solid EPS growth through 2025 and 2026 driven by performance in medical devices, diagnostics, pharmaceuticals, and nutrition sectors.

Financial Stability and Dividend Track Record

Abbott’s financial durability is underscored by its strong balance sheet, holding $7.0 billion in cash as of mid-2024, and showcasing a favorable debt-to-EBITDA ratio of 0.64 compared to its industry peers. Additionally, Abbott boasts a consistent history of dividend payments for 402 consecutive quarters, contributing to its attractiveness for investors, with a current annual dividend yield of 2.0%.

Challenges Ahead for Abbott Laboratories

Despite the positive outlook, Piper Sandler cautions that challenges remain, particularly concerning ongoing litigation related to Abbott’s Similac Special Care 24 formula. While representing a minor slice of total revenue (about $9 million in 2023), the potential legal liabilities could have implications for Abbott’s overall growth path. However, Piper believes much of this risk is already reflected in the market price, suggesting that the long-term growth potential remains intact.

Competitive Pressures and Currency Risks

The emergence of competitive pulse field ablation technologies poses a challenge, particularly for Abbott’s electrophysiology business. Companies like Boston Scientific and Medtronic are advancing rapidly in this domain. Even though Abbott is developing its own PFA technology, its market entry is anticipated to trail behind its competitors, potentially resulting in relative lag until 2026. Moreover, with 61% of its revenue derived from international sources, fluctuations in foreign currency exchange could present additional uncertainties in the future.

Frequently Asked Questions

What rating did Piper Sandler give Abbott Laboratories?

Piper Sandler initiated coverage with an 'overweight' rating and a price target of $131.

How does Abbott's financial growth look for the upcoming years?

Analysts expect Abbott's revenues to grow to $44.84 billion in 2025, with a projected 7.6% increase.

What are the main products driving Abbott's revenue?

Key products include the FreeStyle Libre CGM device and MitraClip for structural heart therapy.

What is Abbott's track record on dividends?

Abbott has a history of paying dividends for 402 consecutive quarters, with a yield of 2.0% in 2023.

What competition does Abbott face in the medical technology sector?

Abbott faces competition from Boston Scientific and Medtronic, especially in the electrophysiology market.

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