Abbott profit beats forecast, nutritional products strong
(Reuters) - Abbott Laboratories (ABT.N) reported better-than-expected second-quarter earnings on Wednesday as strong demand for nutritional products offset lower sales of medical devices and generic prescription drugs.
Despite the earnings beat, Abbott left its full-year profit forecast unchanged at $1.98 to $2.04 per share.
Results beat expectations because of improved profit margins and cost controls, Wells Fargo analyst Larry Biegelsen said in a research note.
Sales of nutritional products, including Similac infant formula and Ensure beverages for adults, rose 7.9 percent to $1.7 billion, representing almost a third of Abbott's total revenue.
Abbott and rival infant formula makers, including Mead Johnson Nutrition Co (MJN.N), Danone SA (DANO.PA) and Nestle SA (NESN.VX), have cut prices of their products in recent weeks following an investigation by China into possible price-fixing and anti-competitive behavior.
Abbott formulas have annual sales of about $400 million in China, representing about 2 percent of overall company sales.
Abbott Chief Executive Miles White on Wednesday said the investigations are unlikely to derail growing demand in China for the products.
"I think the market dynamics remain robust," White said. "And fortunately for us, China doesn't represent a disproportionately large portion of the nutrition business."
Glenn Novarro, an analyst with RBC Capital Markets, said Abbott shares had dipped as much as five percent in the past month on concerns about the China investigation and price cuts, and are a buying opportunity.
Abbott's profit margins improved during the quarter in part because the company is building its nutritionals factories closer to customers in emerging markets, said Stifel Nicolaus & Co analyst Rick Wise. "So they're reducing transportation costs."
Abbott, which in January spun off its branded prescription drugs business into a new company called AbbVie Inc (ABBV.N), earned $476 million, or 30 cents per share, from continuing operations in the quarter, up from $411 million, or 26 cents per share, a year earlier.
Excluding special items, profit was 46 cents per share, beating analysts' average estimate by 2 cents, according to Thomson Reuters I/B/E/S.
Revenue rose 2.5 percent to $5.45 billion, slightly below Wall Street expectations for $5.52 billion. Revenue would have risen 4.2 percent if not for the stronger dollar, which hurts the value of sales in overseas markets.
Sales from the company's array of medical diagnostics rose 5.3 percent to $1.14 billion.
Medical device sales slipped 1.6 percent to $1.36 billion, but that was an improvement from the almost five 5 percent decline in the first quarter.
Sales of generic drugs, which Abbott calls established pharmaceuticals, were off 2.3 percent to $1.22 billion.
"If there's a weakness in the Abbott story, it's established pharmaceuticals," said Joanne Wuensch, an analyst with BMO Capital Markets. She noted the company is making management changes in hopes of revitalizing the business segment.
Abbott shares were up 0.4 percent to $35.83 on the New York Stock Exchange.
(Reporting by Ransdell Pierson; Editing by John Wallace and Andrew Hay)
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