NEW YORK – Difficult macroeconomic conditions and declining COVID-19 testing-related sales have posed a challenge for Abbott, the company said as it reported its third-quarter financial results on Wednesday.
For the three months ended Sept. 30, the Abbott Park, Illinois-based firm reported that its third quarter Diagnostics business revenues fell 6 percent year over year. Overall revenues were $10.41 billion, down 5 percent on a reported basis from $10.93 billion a year ago but beating the consensus Wall Street estimate of $9.68 billion. The firm said that its organic sales, excluding the impact of foreign exchange, grew 1 percent year over year.
In addition to declines in COVID-19 testing demand, Abbott was also negatively impacted by a manufacturing stoppage in February related to certain infant formula products. Excluding COVID-19 testing-related sales and US sales associated with the stoppage, total worldwide Q3 sales fell 1 percent on a reported basis and increased 6 percent on an organic basis, Abbott said.
During a conference call to discuss the results, Abbott CEO Robert Ford noted that the difficult macroeconomic market conditions affecting most companies have also had an impact on Abbott. Inflation has been "a stubborn force globally," but the company has "started to see some moderating impacts in certain areas of our businesses compared to earlier in the year," he said. In addition, global supply chain dynamics and staffing shortages have continued to affect the healthcare markets, including Abbott, although Ford said there have been signs of improvement.
However, the macro conditions are "going to remain challenging," with currency headwinds "very much in play" for next year and inflation expected to continue, he said. Although the firm will "have to be mindful" of cost structure and inflation pressures, Ford also noted that Abbott is interested in potential mergers and acquisitions, and as valuations have come down, that interest has increased and there are a lot of opportunities available.
The company said its Diagnostics business revenues fell to $3.67 billion from $3.91 billion in the prior-year quarter. Within Diagnostics, Core Laboratory Q3 revenues fell 6 percent year over year to $1.22 billion from $1.29 billion; Molecular revenues fell 47 percent year over year to $183 million from $345 million; Point-of-Care revenues fell 6 percent year over year to $127 million from $135 million; and Rapid Diagnostics revenues were flat year over year at $2.14 billion.
The firm's global COVID-19 testing-related sales were $1.7 billion in the quarter, down slightly from the $1.9 billion reported a year ago. Excluding COVID-19 testing-related sales, worldwide Diagnostics revenues declined less than 1 percent on a reported basis and increased 6 percent on an organic basis. Ford said that the increase in the base business was fueled by the continued international rollout of the firm's Alinity platform.
He added that COVID-19 testing-related sales were "significantly higher than expectations" but still lower than 2021. The decline was driven by lower demand for laboratory-based tests, but demand for rapid tests "continues to be strong," with sales of those tests — the BinaxNow, PanBio, and IDNow assays — at similar levels compared to Q3 2021. COVID-19 testing sales have "been stickier than most have assumed," he said.
In its other businesses, Nutrition revenues fell 15 percent to $1.80 billion from $2.11 billion; Established Pharmaceuticals rose 5 percent to $1.33 billion from $1.27 billion; and Medical Devices fell less than 1 percent to $3.62 billion from $3.63 billion.
Abbott reported net earnings of $1.44 billion, or $.81 per share, in Q3 2022, compared to $2.10 billion, or $1.17 per share, in the year-ago period. Adjusted EPS for the recently completed quarter was $1.15, beating analysts' consensus estimate of $.94.
Abbott increased its full-year 2022 guidance more than 10 percent compared to its original guidance released in January, raising its expectations for EPS from continuing operations to $3.75 to $3.81. Adjusted EPS from continuing operations is expected to be between $5.17 and $5.23, the firm said. That guidance assumes COVID-19 testing-related sales of $7.8 billion, which includes sales of $7.3 billion through September 2022 and sales of $500 million in Q4. Bob Funck, Abbott's CFO, noted on the call that Q4 EPS is expected to be between $.86 and $.92 per share and that total company organic sales growth, excluding COVID-19 testing-related sales, is forecast to be in the mid-single digits for the fourth quarter.
Ford said that the COVID-19 guidance does not include the potential for a winter surge but noted that Abbott has the supply to scale up quickly and provide more testing if necessary. He also said that the $500 million Q4 expectation is the "endemic forecast" that the firm expects to see throughout 2023.
As of now, Abbott doesn't have any significant government contracts included in its Q4 forecast, but Ford said that the firm has had conversations with governments that recognize Abbott's ability to scale up, and that if governments "realize that they do need to procure more testing, we've got the product, we've got the reliability of the product, and we've got the reliability of the supply."
In Wednesday morning trading on the New York Stock Exchange, shares of Abbott were down around 7 percent to $97.71.