Abbott Laboratories (ABT) is scheduled to report third-quarter 2014 results before the opening bell on Oct 22, 2014.
Last quarter, Abbott Labs reported a positive earnings surprise of 5.9%. On average, Abbott Labs has posted a 10.3% positive surprise in the last four quarters. Let’s see how things are shaping up for the third quarter.
Factors to Influence 3Q Results
Abbott Labs is an extremely diversified company with its presence in the diagnostics, nutrition, generics and medical devices markets after having separated its pharmaceutical business into a new company called AbbVie (ABBV) in Jan 2013.
However, the adoption of austerity measures by developed markets has been affecting revenues over the past few quarters. Unfavorable currency fluctuations along with the disruption in international pediatric nutrition sales in China also impacted sales and we expect to see an impact on the third quarter as well from the same.
Meanwhile, the company’s Established Pharmaceuticals Division continues to be impacted by lower-than-expected growth rates and we expect further deceleration of growth in this segment in 2014.
In our view, all these factors should impact third-quarter results notwithstanding Abbott Labs’ positive earnings streak in the last 12 months.
Earnings Whispers?
Our proven model conclusively shows that Abbott Labs is likely to miss earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to likely have earnings beat. That is not the case here as you will see below.
Zacks ESP: The ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -1.67%. This is because the Most Accurate Estimate currently stands at 59 cents while the Zacks Consensus Estimate currently stands at 60 cents.
Zacks Rank #4 (Sell): Abbott Labs currently carries a Zacks Rank #4. We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.
Stocks to Consider
Here are some stocks in the broader healthcare sector that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:
Teva Pharmaceutical Industries Ltd. (TEVA) has an earnings ESP of +5.8% and carries a Zacks Rank #2 (Buy). It is scheduled to report its third-quarter results on Oct 30.
Ligand Pharmaceuticals Inc. (LGND) has an earnings ESP of +30.00% and carries a Zacks Rank #1 (Strong Buy). The company is scheduled to release its third-quarter results on Oct 27.
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