[Updated: 6/3/2021] Revised Abbott Guidelines
The share price of Abbott (NYSE: ABT) has seen a sharp drop of 10% over the past five trading days. The drop can be attributed to the company’s announcement of revised earnings guidance for full year 2021. Abbott now expects Adjusted EPS to be between $ 4.30 and $ 4.50 for 2021, compared to its previous estimate of $ 5.00. Investors were not happy with the announcement and ABT stock plunged more than 10% in a single trading session yesterday (June 1).
The revised income estimates come after a steady increase in vaccination against Covid-19, with more than 40% of the US population now fully vaccinated. This means that the demand for testing has declined, a trend that is expected to continue. For Abbott, it was the Covid-19 testing that led to a strong 40% increase in its Diagnostics revenue in 2020 and a massive 2.2-fold growth in the first quarter of 2021. However, now with several countries working on large-scale vaccination programs, it was expected that the demand for Covid-19 tests would decline.
In our previous updates on ABT stock, we discussed that as the company sees a slowdown in its Diagnostics business, Abbott’s other business, primarily medical devices, will likely drive revenue growth. This can be attributed to an increased volume of overall procedures. Additionally, we believe Abbott’s new forecast appears to be very conservative, even if we were to model slower growth in the Diagnostics business, compared to a 40% jump last year.
Given that ABT stock has fallen 10% in just five days, will it resume its bearish course in the coming weeks, or is a stock rally imminent? We believe the stock will rebound in the short term, following the historical pattern of ABT stock. Using the recent trend (10% drop in one week) and ten years of historical stock market data, the Trefis AI engine finds that ABT stock will likely rise over the next month (twenty-one trading days).
According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price using historical stock market data, ABT stock returns are on average around 4% during the period of one month (twenty-one trading days) after having undergone a 5% decline in one week (five trading days), slightly above the expected return of 3.1% for the S & P500 over the next month (twenty-one trading days). More importantly, there is a strong 70% probability of a positive return over the next 21 trading days and a 57% chance of a positive excess return.
But how would those numbers change if you wanted to hold ABT shares for a longer or shorter period? You can test the answer and many other combinations on the Trefis Machine learning engine to test the chances of Abbott shares rising after a fall. You can test the chances of recovery over different time intervals of a quarter, a month, or even a single day!
Some fun scenarios, FAQs and explanation of Abbott stock movements:
Question 1: Is the average return on Abbott Laboratories shares higher after a decline?
Reply: Consider two situations,
Case 1: Abbott Laboratories’ stock drops -5% or more in one week
Case 2: Abbott Laboratories’ stock increases by 5% or more in a week
Is the average return on Abbott Laboratories’ shares higher in the next month after Case 1 or Case 2?
ABT actions fares better after case 1, with an average return of 3.8% during the following month (21 trading days) in case 1 (where the stock has just suffered a loss of 5% during the previous week), against an average return 0.8% for case 2.
In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days in case 1, and an average return of only 0.5% for case 2, as detailed in our dashboard. which details the average return of the S&P 500 after a fall or rise.
Try the Trefis machine learning engine above to see for yourself how the shares of Abbott Laboratories are likely to perform after a specific gain or loss over a period of time.
Question 2: Does patience pay?
Reply: If you buy and hold shares in Abbott Laboratories, it is expected that over time short-term fluctuations will cancel each other out and the long-term positive trend will favor you – at least if the company is through. elsewhere solid.
All in all, according to data and calculations from the machine learning engine Trefis, patience absolutely pays for most actions!
For the ABT share, the returns over the following N days after a variation of -5% over the last 5 trading days are detailed in the table below, as well as the returns of the S & P500:
Question 3: What about the average return after a rise if you wait a while?
Reply: The average return after a rise is naturally lower than that after a fall, as detailed in the previous question. Interestingly, however, if a stock has won in the last few days, you’d better avoid short-term bets for most stocks – although ABT stock seems to be an exception to this general observation.
[Updated: 5/28/2021] QDEL actions against ABT
We think that Quidel
is currently a better choice compared to Abbott. QDEL stock is trading at about 3.1x sliding income, compared to about 5.6x for Abbott. Does this gap in Quidel’s valuation make sense? To a certain extent, if we look at the prospects for the future. As both companies have profited from the pandemic with massive demand for Covid-19 tests, QDEL’s stock is weighed down amid concerns over declining sales volume of Covid-19 tests, given the increase in the number of Covid-19 tests. vaccination rate. However, there is more to the comparison. Let’s step back to take a more complete picture of the relative valuation of the two companies by looking at historical revenue growth as well as operating profit and operating margin growth. Our dashboard Abbott vs. Quidel: ABT stock seems overvalued compared to QDEL stock has more details on this. Parts of the analysis are summarized below.
1. Income growth
Between 2017 and 2020, Abbott’s revenue grew by around 26%, from about $ 27.4 billion to $ 34.6 billion, mainly due to strong growth in diagnostics business, which saw their turnover will almost double to reach $ 10.8 billion in 2020, compared to $ 5.6 billion in 2017. Our Abbott’s income The dashboard summarizes the sectoral distribution of the company’s income. Looking at Quidel, total revenue increased sixfold from $ 0.3 billion to $ 1.7 billion in the same period. Much of this growth occurred in 2020, due to very high demand for Covid-19 tests. Over the past twelve months, Abbott has seen its revenues increase 16.3%, well below the 211% figure for Quidel.
2. Operating result
Abbott’s operating profit increased 3.4-fold from $ 1.6 billion in 2017 to $ 5.4 billion in 2020, driven by revenue growth as well as strong expansion in Operating margins of 5.7% to 15.5% over the same period. The increase in margin is primarily due to slower growth in operating expenses, primarily selling and administrative expenses, compared to revenue growth. Looking at Quidel, operating income grew more than 11 times from less than $ 0.1 billion in 2017 to $ 1.1 billion in 2020, thanks to both revenue growth and expanding margins. Quidel’s operating margins jumped to 64.4% in 2020, from just 9.8% in 2017. Over the past twelve months, Abbott’s operating margin increased by 400 basis points from 4,650 basis points for Quidel.
The net of everything
Although Abbott’s revenue base is much larger, Quidel’s revenue and margin growth has been comparatively much higher. Although both companies are benefiting from an increase in Covid-19 testing, the QDEL share has been weighed down by investor concerns about future sales growth. To some extent, this is warranted, given that Abbott is much more diverse and when Covid-19 testing declines, Abbott’s other business segments, primarily medical devices, will drive revenue growth.
But does that mean there is no room for Quidel’s business? We do not think so. There is no denying that Quidel will experience a drop in sales, as the Covid-19 crisis ends, but some of the demand for testing will remain over the next few years. There may be a negative test report requirement for in-person activities, possibly schools, and for travel. Quidel’s QuickVue, a home-based Covid-19 test, has already obtained emergency use clearance from the US FDA, and it can meet that demand. The company also has the QuickVue SARS antigen test to meet screening requirements for asymptomatic people.
Overall, the company’s revenue and profits will surely be better than in 2019. According to consensus estimates, revenue of $ 1.25 billion in 2022 (marks a 25% year-on-year decline) is still 2.5 times higher than in 2019. Looking at the result, his estimate of adjusted EPS of $ 10.55 in 2022 is 3.5 times the figure of $ 2.97 seen in 2019. But, at current levels of $ 121, QDEL stock only rose 63% from the levels of around $ 75 seen towards the end of 2019.
Now, despite exceptional revenue and margin growth over the recent past, QDEL stock has lost more than half of its value in just a few months (from over $ 250 in February 2021 to $ 120 now), and we believe that after this large correction, the P / S multiple difference of 5.6x for Abbott versus 3.1x for Quidel will likely decrease in the future in favor of the cheaper QDEL stock.
While Quidel seems like a better investment than Abbott, it’s helpful to see how its peers stack up. Comparison of Abbott’s actions with his peers summarizes how Abbott stacks up against its peers on the metrics that matter. You can find other useful comparisons at Peer comparisons.