Abbot Laboratories: COVID-19 Tests Will Drive Further Growth, 5-Star Analyst Raises Price Target

Unlike other smaller healthcare companies, powerhouse Abbott Laboratories (ABT) hardly needed a global pandemic to raise awareness. The healthcare giant was performing well before the viral outbreak, but a slew of good news has just pushed its share price up to a new all-time high of $100.

The company released its quarterly results last Thursday, delivering solid beats across the board. Specifically, revenue came in at $7.7 billion, indicating organic growth of 4.3%, while EPS hit $0.65, 4 cents above the estimates and exhibiting growth of 3.2%. On account of the economic uncertainties due to COVID-19, the company suspended guidance for 2020.

The positive print isn’t much of a surprise. Over the last five years, Abbot has beaten top and bottom-line expectations in most quarters.

But according to Credit Suisse’s Matt Miksic, the real good news was in the details.

“Perhaps the most significant takeaways from Q1 results and management commentary related to the substantial increase in volumes and growth in new COVID-19 tests,” the 5-star analyst said, adding, “We view this wave of new tests as a significant new growth driver for ABT over the next 2-3 years, and expect consensus estimates and growth expectations to rise accordingly in the coming months.”

Over the past several weeks, Abbot has launched three approved COVID-19 tests; two molecular tests on the company’s ID NOW point-of-care platform and m2000 lab-based platform and a lab-based serology blood test. The company expects to add two more in the coming weeks; a lateral flow serological test and an additional lab-based serology test.

“We estimate this wave of COVID-19 tests could reach annual volumes in 2021 of ~50 mil for molecular and ~550 mil serological, driving significant incremental Diagnostics sales of $2.7 bil and 85c to sales and EPS for 2021, respectively, and continued growth in 2022,” Miksic noted.

Accordingly, the top analyst reiterated an Outperform on Abbot along with raising the price target – bumped up from $95 to $106. Upside from current levels is 10%. (To watch Miksic’s track record, click here)

All in all, the rest of the analyst community backs up Miksic’s call. A strong Buy consensus rating is based on 9 Buys and 3 Holds. At $103.85, the average price target implies upside of 9% in the year ahead. (See ABT stock analysis on TipRanks)

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