UPDATE 3-Abbott revenue misses on weak sales of formula, generics
By Ransdell Pierson
Jan 22 (Reuters) - Abbott Laboratories Inc reported weaker-than-expected fourth-quarter revenue, hurt by disappointing sales of its generic medicines and the lingering impact of an overseas recall of its baby formulas last summer.
Company officials further spooked investors by forecasting in a conference call that earnings in the first quarter of 2014 would be well below Wall Street expectations. Abbott's full-year forecast, however, was in line with analyst forecasts and reflects likely double-digit earnings growth.
Abbott shares were down 2 percent to $38.33 in late morning trading, after falling more than 5 percent earlier on Wednesday.
Glenn Novarro, an analyst with RBC Capital Markets, said anemic sales of generic drugs was the main reason overall company sales fell short in the quarter.
"We suspect that pharmaceutical (weakness) will take longer to turn around," Novarro said, adding that it was a major concern among investors.
Abbott, which spun off its patent-protected drugs early last year into a separate publicly traded company called AbbVie Inc , reported fourth-quarter earnings from continuing operations of $589 million, or 37 cents per share. That compared with a loss of $522 million, or 33 cents per share, a year earlier, when Abbott took a number of large charges, including to extinguish debt.
Excluding special items, Abbott earned 58 cents per share, matching the average analyst's forecast, according to Thomson Reuters I/B/E/S.
Global sales rose 0.4 percent to $5.66 billion, below Wall Street expectations of $5.72 billion. Sales would have risen 3.3 percent if not for the stronger dollar, which lowers the value of sales in overseas markets.
When Abbott spun off its branded prescription drugs last year, it kept its wide array of generic medicines - those no longer having patent protection - and calls them "established pharmaceuticals."
Weak sales of the products, which are sold overseas, have dogged Abbott in previous quarters, and disappointed again in the fourth quarter. They fell 4.3 percent to $1.29 billion, after falling 2.9 percent in the prior quarter. The fourth-quarter decline was attributed to the combination of a weak dollar and especially weak sales in Japan and the developed markets of Western Europe.
Abbott said it expects earnings this year, excluding special items, of $2.16 to $2.26 per share. That guidance is in line with Wall Street expectations of $2.21 per share. But the company forecast first-quarter earnings of 34 to 36 cents per share, far short of Wall Street expectations of 48 cents per share.
Abbott said first-quarter results would be hurt by the recall of pediatric formulas and by the continued negative impact of the stronger dollar.
Sales of the company's nutritional products, including Similac infant formula and Ensure beverages for adults, fell 0.8 percent to $1.7 billion in the fourth quarter.
Abbott recalled batches of its milk formula brands in China and Vietnam in August due to fears that protein concentrate, an ingredient provided by an outside supplier, was contaminated.
Although no contamination was ever found, the disruption reduced sales of its pediatric formulas by $90 million in the third quarter, and another $90 million in the fourth quarter, Abbott said.
Abbott said in October that the recall would continue to hurt sales of its nutritional products, its biggest product line, through the first half of 2014.
Edward Jones analyst Jeff Windau said the nutritionals business will be "bumpy" for the next year or two.
"But it is improving and will get back on track," Windau predicted, noting that the company was expanding its manufacturing capacity and planned to boost sales of the formulas in emerging markets.
Sales of Abbott medical devices rose 2 percent in the quarter to $1.43 billion, with strong performance of the unit's medical optics offsetting declining sales of diabetes care products.