Abbott beats profit forecasts, raises dividend sharply

Abbott Laboratories reported higher-than-expected quarterly earnings today, helped by strong demand for its diagnostics, and boosted its quarterly dividend by more than 50 per cent.

Lower taxes and cost-cutting also helped Abbott beat earnings forecasts, analysts said. The company’s shares jumped 4.5 per cent in early trading to $35.23.

"The 57 per cent dividend hike is the big news," Jefferies analyst Jeffrey Holford said in a research note. Abbott, which employs about 3,000 people across 11 sites in Ireland, said it would boost its dividend to 22 US cents per share from 14 cents, starting with the February 15th payment.

RBC Capital Markets analyst Glenn Novarro said the dividend's annual yield will grow to 2.7 per cent, and likely attract investors following recent declines in Abbott shares related to worries about weakness of its nutritional business.

Abbott, which spun off its branded prescription drugs business in January into a separate publicly traded company called AbbVie, reported third-quarter earnings from continuing operations of $773 million, or 49 cents per share, up from $339 million, or 21 cents per share, a year earlier.

Excluding special items, Abbott earned 55 cents per share. Analysts, on average, had expected 51 cents.

Global company revenue rose 2 per cent to $5.37 billion, a bit shy of Wall Street forecasts for $5.39 billion. Sales would have risen 4.3 per cent if not for the stronger dollar, which lowers the value of sales in overseas markets.

Despite beating earnings forecasts, Abbott left its full-year profit view unchanged at $1.98 to $2.04 per share, excluding special items.

“They’re guiding conservatively given the current general macroeconomic situation,” said Edward Jones analyst Jeff Windau, who has a “buy” rating on Abbott. “The quarter highlights overall strength of the company, including its strong medical device business and its international presence, including growth in emerging markets.”

Sales of nutritional products, including Similac infant formula and Ensure beverages for adults, rose 1.9 per cent to $1.64 billion in the third quarter – representing a slowdown from growth of 7.9 percent in the second quarter.

Abbott and rival infant formula makers, including Mead Johnson Nutrition, Danone and Nestlé , cut prices of the products in recent months following an investigation by China into possible price-fixing and anti-competitive behavior.

Abbott formulas have annual sales of about $400 million in China, representing about 2 per cent of overall company sales.

Sales of Abbott diagnostics rose 8 per cent to $1.13 billion, while sales of its medical devices climbed 1.9 per cent to $1.34 billion. But sales of its generic prescription drugs, which it calls established pharmaceuticals, fell 2.9 per cent to $1.24 billion. – Reuters