Abbott Laboratories (ABT) is scheduled to report fourth-quarter 2014 results before the opening bell on Jan 29, 2015.
Abbott Labs’ track record was impressive in the first nine months of 2014 with the company beating estimates comfortably in the last three quarters. The average earnings surprise over the last four quarters is 6.59%.
Factors to Influence 4Q Results
Abbott Labs is a diversified company with presence in diagnostics, nutrition, branded generics and medical devices, 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 affected revenues over the past few quarters. Lackluster performance in the established pharmaceuticals division propelled the company to realign the segment and divest its branded generic business in developed markets.
Unfavorable currency fluctuations in both emerging and developed markets have negatively impacted sales and will continue to do so in the fourth quarter by 2.5%. Sales in 2014 are expected to drop by 2% due to the recently strengthening dollar.
Moreover, growth has dampened in the medical devices and diagnostics segments. The vascular business is particularly dismal in the U.S., due to pricing pressure, followed by Japan and Europe. A competitive environment in the drug-eluting stent business continues to negatively impact the company’s quarterly sales.
In our view, these factors will impact fourth-quarter results adversely, notwithstanding Abbott Labs’ positive earnings streak in the last 12 months.
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 have earnings beat. 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 pegged at -1.47%. This is because the Most Accurate estimate currently stands at 67 cents while the Zacks Consensus Estimate is 68 cents.
Zacks Rank: Abbott Labs currently carries a Zacks Rank #5 (Strong Sell). 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 That Warrant a Look
Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.
Biodel Inc. (BIOD) has an Earnings ESP of +33.33% and carries a Zacks Rank #1. The company is scheduled to release first-quarter fiscal 2015 results on Feb 5.
Actavis plc (ACT) has an earnings ESP of +4.70% and carries a Zacks Rank #3. The company is scheduled to release its fourth-quarter 2014 results on Feb 18.
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