Tailwinds And Pipeline Products Drive Abbott Shares Higher
Abbott Laboratories (NYSE:ABT) has been one of our favorite dividend-paying stocks for quite some time. The yield isn’t much to brag about at 1.5% but it's an incredibly safe payout and backed up by a 32-year history of dividend increases. In fact, the only hiccup in the dividend payout was way back in 2013 when the company spun off AbbVie (NYSE:ABBV), and that in itself was a dividend for shareholders that has paid off handsomely over time. But, back to the point, Abbott’s fiscal Q3 earnings report is impressive and reveals that not only do COVID-19 related tailwinds continue to blow, but the pipeline of products is robust and should drive revenue growth into future quarters.
Abbott Laboratories Blows Past The Consensus Estimate
Abbott Laboratories had a truly stunning quarter for a company with such visibility. The company reported $10.93 billion in net consolidated revenue which is good for a gain of 22.8% over last year. This beat the Marketbeat.com consensus estimate by nearly $1.40 billion or 1400 basis points better than the average analyst estimate.
Now, COVID-19 related testing supplies are worth nearly 1,200 basis points of the growth, but strength across all segments helped drive revenue above expectation. On a segment basis, Diagnostics leads with growth of 48.2% but that does include COVID-19 testing. The Nutrition segment comes in second with growth of 23.4% and is followed up by Pharma with 15.1% growth and Medical Devices with 14.6% growth.
Moving down to the bottom line, the company has been able to navigate the inflationary environment well and delivered a substantial improvement in the margin. The company reports a 650 basis point improvement in operating margins to 23.3% which helped to drive high double-digit gains on the bottom line. The company's GAAP earnings of $1.17 are up 70% from last year and beat the consensus by $0.50 while the adjusted earnings of $1.40 are up 43% over last year and beat the consensus by $0.46.
Looking forward, the company is expecting revenue strength to persist into the fourth quarter and has raised guidance accordingly. The company is now expecting full-year 2021 earnings in the range of $5.00 to $5.10 on an adjusted basis versus the previous guidance of $4.30 to $4.50 and the consensus estimate of $4.45.
A Dividend Increase Is At Hand For Abbott Laboratories
Abbott Laboratories just paid out its most recent distribution, but the next declaration is expected at any time. Based on the company's history, this next declaration should include a dividend increase and it could run in the low double digits. The company is running with an 11% distribution CAGR and a 40% payout ratio versus a consensus estimate that is far too low, so there is evidence in our favor. In our view, Abbott investors should not be surprised to see the next dividend increase run in the range of 10% to 15%.
The Technical Outlook: Range-Bound Abbott Moves Higher
Abbott Q3 results and guidance have the shares moving sharply higher but still trading within their trading range. In our view, shares of Abbott can be expected to retest resistance near the $130 level, but there is a risk of resistance that could cap the gains. If the stock cannot get over this level, price action could move sideways over the next few weeks or months and continue the trading range that began earlier this year. If, however, the stock can get above the $130 level, we would expect to see it move up to the $155 level within the next two to three months.
