By Ransdell Pierson
Jan 22 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
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
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
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 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