ABT stock has a track record of beating the market over time
First the bad news. Abbott Laboratories (NYSE:ABT) reports earnings today and there is growing sentiment that it will miss on either the top line or bottom line or both. Adjusted earnings per share (EPS) are expected to come in around $1.19 per Trefis analysis.
This is either a miss or a beat depending on what analysts you follow. Trefis analysts have a consensus estimate of $1.21. However, the consensus of analysts on MarketBeat is for Abbott to report EPS of $1.16.
And on the top line, Trefis estimates $10.6 billon. This would be below the $10.7 billion estimate which was also the revenue figure the company posted in the prior year’s quarter.
A positive catalyst for the company’s revenue is expected to be the company's Diagnostics division. This business is getting a boost from increased Covid-19 testing. However, whereas the virus is helping the company on that front, analysts also expect that the company will report a decline in sales of medical devices.
The good news is that ABT stock looks undervalued. And in this market that’s saying something. At this time, the consensus price target of the analysts tracked by MarketBeat is $139.11, a 13.8% upside from the stock’s price at the time of this writing. And in the last month, the company has received two bullish price target increases that put the stock trading over $150 per share.
History is on Abbott’s Side
I don’t always put stock into historic price charts because every investor knows that past performance isn’t a guarantee of future results. However, I found this interesting.
In the 10 years between December 31, 1999 and December 31, 2009, ABT stock posted a 58% gain. The S&P 500 index was down 24% in that same period. In the next 10 years, ABT stock which encompasses the current bull market, ABT stock climbed 236%. The S&P 500 climbed 65%.
A lot has happened in the markets over the last 20 years. The tech bubble burst; the housing bubble burst leading to the financial crisis; we’ve had geopolitical tensions. And through it all, Abbott has outperformed the broader market.
That’s not to say the company will always beat the market. Investors can reasonably expect that the revenue Abbott has received from its Covid-19 testing will go down rapidly in the next few years.
However, Abbott is a company that is highly diversified. That helps make it a safe, conservative investment. In times like this, it’s important to buy stocks that you want to be owning in 10 years. Using that formula, ABT stock looks like a solid buy.
The Dividend Will Keep Going Up
In addition to Abbott’s historical stock price growth, the company recently became part of the exclusive Dividend King club. This is reserved for companies that have increased their dividend for a minimum of 50 years. Abbott recently hit the 50-year mark and income investors will like the average three-year dividend growth that is over 60%.
Wait For a Better Entry Point
Right now, the relative strength indicator (RSI) for ABT stock is 26.9 which suggests strictly on momentum that the stock is oversold. And it appears that Abbott is trying to find support at the 200-day simple moving average (SMA).
However, as with most stocks, the price action has been volatile and significantly bearish in the last month. That means you may want to wait for more reliable confirmation that support has been found. If ABT stock drops below is 200-day SMA, investors can look to find support in a range from $116.66 to $117.54.