Abbott Laboratories Reports Mixed Q4 Results, but Strong Outlook Boosts Investor Confidence

Abbott Laboratories, a leading medical device maker, announced its fourth-quarter 2024 earnings on Wednesday, revealing a mixed bag of results that ultimately exceeded lowered investor expectations. While revenue slightly missed estimates, the company showcased strong organic growth across its segments and provided upbeat guidance for 2025, sending shares up over 1%. This positive market reaction suggests investors were primarily focused on the underlying strength of Abbott’s core business and its promising future prospects, outweighing the minor revenue shortfall.

Key Takeaways: Abbott Labs Q4 2024 & 2025 Outlook

• Revenue slightly missed expectations, reaching $10.97 billion compared to the estimated $11.01 billion. However, this was partly attributed to an unfavorable impact from a strengthening U.S. dollar.
• Strong organic sales growth of 10.1% demonstrates the underlying health of Abbott’s core businesses, excluding Covid-19 testing impacts.
• Adjusted Earnings Per Share (EPS) met expectations at $1.34, showcasing strong profit margin expansion.
• Positive 2025 Guidance projects 7.5% to 8.5% organic sales growth, exceeding analyst consensus, and significant margin expansion.
• Continued strength in key segments, particularly medical devices (driven by strong CGM sales) and adult nutrition, highlights Abbott’s diversified growth engines.

Detailed Breakdown of Abbott’s Q4 Performance

Medical Devices: A Standout Performer

Abbott’s medical devices segment emerged as a clear winner in the fourth quarter, significantly outperforming expectations. Reported sales grew by 13.7%, reaching an organic growth rate of 14%. This robust performance was driven by double-digit growth in both the U.S. and international markets. A significant contributor to this success was the phenomenal performance of diabetes care products, particularly continuous glucose monitors (CGMs). Sales of CGMs like the FreeStyle Libre surged by a remarkable 22.8% organically, reaching $1.8 billion in the quarter. For the full year, CGM revenue reached approximately $6.5 billion, representing 22% annual growth overall and 27% in the U.S. Abbott’s CEO, Robert Ford, highlighted that the company’s U.S. market share for CGMs has increased by over 10 percentage points in the last three years. Looking ahead, Abbott plans to expand the availability of its over-the-counter CGM, Lingo, to more U.S. cities. This expansion, launched in select markets in September, aims to tap into the broader health-conscious consumer market beyond diagnosed diabetics.

Nutrition Segment: Steady Growth Despite Miss

Abbott’s nutrition segment, encompassing popular products such as Ensure and PediaSure, also demonstrated growth but fell slightly short of analyst expectations. Reported sales increased by 4.5% year-over-year, while organic sales grew by 7.1%, reaching $2.13 billion. Within the nutrition segment, pediatric nutrition sales saw a 2.5% organic increase globally, aided by market share gains in the U.S. infant formula market. Adult nutrition sales performed exceptionally well, exhibiting 11.4% organic growth thanks to the strong performance of Ensure and Glucerna. CEO Ford emphasized that adult nutrition has achieved a five-year compounded annual growth rate of 9%, attributing this success to strong brands, favorable demographic trends, and strategic investments in manufacturing capacity to meet increasing global demand.

Diagnostics: Rebounding from Covid-19 Impact

The diagnostics segment experienced a decline in sales due to the expected normalization of Covid-19 testing demand. However, excluding Covid-19 test sales, global diagnostics sales increased organically by 6.1% year-over-year. A remarkable 16% increase in rapid diagnostics sales, encompassing tests for illnesses like flu, strep throat, and RSV, further demonstrated the segment’s resilience beyond the pandemic. Ford noted that excluding the impact of “challenging market dynamics in China,” the combined growth in all other markets was in the double digits.

Established Pharmaceuticals: Consistent International Growth

Abbott’s established pharmaceuticals business, focusing on generic pharmaceutical products in international markets, delivered solid organic growth of 8.5% year-over-year. Particularly strong results were seen in countries identified by Abbott as having the most promising long-term growth potential, where sales grew by 8.8% organically.

2025 Guidance: A Positive Outlook

Abbott’s guidance for 2025 paints a picture of continued growth and profitability. The company projects full-year organic sales growth of 7.5% to 8.5%, exceeding the FactSet consensus estimate of 7.43%. Furthermore, Abbott anticipates an adjusted gross profit margin of approximately 57% which would
represent an increase of about 80 basis points compared to 2024. The company also forecasts an adjusted operating margin of 23.5% to 24% which implies an expansion of 150 basis points from 2024 results. This translates to projected full-year adjusted earnings guidance of $5.05 to $5.25 per share. While the midpoint of this earnings outlook is slightly below the LSEG consensus estimate – only off by “a penny,” – management’s conservative approach at the start of the year is likely a key factor contributing to this.

Investor Sentiment and Conclusion

Despite the slight revenue miss in Q4 2024, the overall narrative surrounding Abbott Laboratories remains positive. The company exhibited strong organic growth across its core businesses, met EPS expectations, and offered compelling guidance for 2025 that surpasses analyst consensus. The market’s positive reaction, reflected in the stock price increase, suggests investors appreciate Abbott’s underlying strength and its promising future trajectory. The absence of discussion regarding ongoing infant formula lawsuits in the earnings call also emphasizes a shift of focus back to Abbott’s robust fundamentals, removing a significant overhang that affected the stock value previously. **The current valuation of Abbott stock at just under 23 times the midpoint of 2025 earnings guidance appears relatively cheap considering its growth prospects and the underlying strength of its business.** The normalization of Covid-19 sales at a low level is also contributing factor to the underlying strength displayed by the company, making for even further impressive growth in the ex-Covid business segments.