Abbott Laboratories Company Earnings: Where's the Wow?


Abbott Labs (NYS: ABT) reported solid third-quarter results but didn't wow anyone. Shares were down as much as 4% in intraday trading Wednesday after the company's earnings announcement.

Earnings grew 10.2% compared to the same quarter in 2011. This level beat Abbott's prior guidance and analyst estimates. However, reported revenue fell by 0.4% compared to last year.

In an analysis prior to the earnings release, I examined three keys to Abbott's continued success. Let's look at how the company fared during the third quarter against these three criteria.

1. Humira horsepower
The big key for Abbott right now is its multi-purpose drug Humira. Reported sales for third quarter grew 10.1% year-on-year. Not coincidentally, that figure nearly matches the company's overall sales growth for the quarter.

Third-quarter sales for Humira were basically flat compared to the second quarter, but the source of the revenue changed noticeably. In the second quarter, international sales accounted for 55% of total revenue. However, international sales fell to 51% of the total during the third quarter.

Humira battles against Enbrel, marketed by Amgen (NAS: AMGN) and Pfizer (NYS: PFE) , in the rheumatoid and psoratic arthritis markets. It competes against Johnson & Johnson's (NYS: JNJ) Remicade for treatment of these conditions plus others, including Crohn's disease and ulcerative colitis. All are blockbuster drugs, but Humira stands to be the biggest winner of them all.

2. Generic gyrations
Abbott saw a decline of 1% in the first quarter and 6% in the second quarter for its "established pharmaceuticals" segment, which sells generic drugs. The company blamed European "pricing pressures for these drops.

This decline continued in the third quarter. Reported established pharmaceuticals sales fell by 7.3% compared to the same quarter in 2011. Humira's strength compensates for this continued slide for now. However, that won't last much longer. Abbott's spin-off of a new company, AbbVie, in 2013 means that the generics business can't count on help from Humira going forward.

3. Currency comeback
In the analysis prior to the company's third-quarter results, I predicted that the falling dollar during much of the third quarter could help the company improve earnings. This prediction turned out to be wrong.

Currency fluctuations served as a drag on Abbott's earnings in the second quarter. The company stated then that unfavorable foreign exchange caused sales to be 4.7% less than they would have been otherwise.

Unfortunately, things weren't much better in the third quarter. The company cited a 4.5% unfavorable foreign exchange impact on sales. Perhaps continued weakness of the dollar could help Abbott in the days ahead, but I won't make any more predictions on this front.

Going forward
Abbott's earnings results for this quarter weren't overly exciting, but they weren't horrible, either. The company also narrowed full-year guidance from the $5.00-$5.10 range to $5.06-$5.08. That reflects a fairly positive outlook going forward.

I like the company for its dividends -- 355 quarters in a row paying dividends makes for a nice track record. I also like the upcoming spin-off of AbbVie. Humira continues to show considerable strength. There are few promising drugs in the pipeline as well.

Perhaps neither Abbott nor AbbVie will be"wow" stocks, but they could be good additions to investors' portfolios over the long run.

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Foll contributor Keith Speights has no positions in the stocks mentioned above. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services recommend Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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