Abbott Labs (ABT) Q2 Earnings: Will The Stock Surprise?

Abbott Laboratories (NYSE:ABT) is scheduled to report second-quarter 2016 results before the opening bell on Jul 20.

Abbott Labs has an impressive track record, having surpassed estimates in each of the trailing four quarters with an average earnings surprise of 3.17%. Let’s see how things are shaping up for this announcement.

Factors Influencing the Quarter

Strengthening of the dollar against almost every currency adversely impacted the company’s business in the past few quarters. However, strong first-quarter results as well as an improving exchange rate outlook led to management raising the annual earnings guidance.

Earnings for the second quarter are estimated to be around 52–54 cents per share.

Sales in 2016 will suffer about 2% due to currency movements. Second-quarter sales are expected to decline in the low single digits, reflecting a 3% negative currency impact. On a segmental basis, the company expects nutrition sales to increase in the mid-to-high single digits, while sales from the diagnostic unit are anticipated to grow in the mid-single digits. Vascular sales are projected to remain flat on an operational basis in second-quarter 2016, while the Diabetes care business may accelerate as the company strives to meet increasing demand for Libre from consumers and healthcare professionals. Sales are estimated to increase in the mid-single digits. Meanwhile, sales at the established pharmaceuticals division (EPD) are expected to increase in the mid-single digits as well.

Abbott Labs has an extremely diversified portfolio which management reshaped through strategic acquisitions/divestitures in recent times. It has been taking strategic steps to expand its footprint in the growing geographies and investing in R&D, which has resulted in numerous new product launches across its businesses. Realignment of the EPD division through acquisitions in Latin America and Russia, along with business divestitures in developed markets, has positioned the company well for the coming quarters.

What Our Model Indicates

Our proven model does not conclusively show that Abbott Labs is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to likely post an earnings beat. However, that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 53 cents.

Zacks Rank: The combination of Abbott Labs’ Zacks Rank #3 and a 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some health care stocks that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Johnson& Johnson (NYSE:JNJ) has an Earnings ESP of +0.60% and a Zacks Rank #2. The company is scheduled to report second-quarter results on Jul 19.

Gilead Sciences Inc. (NASDAQ:GILD) has an Earnings ESP of +6.91% and a Zacks Rank #2. The company will report results on Jul 25.

The Earnings ESP for Novartis AG (NYSE:NVS) is +0.85% and it carries a Zacks Rank #3. The company is scheduled to release results on Jul 19.