Allow me to administer a momentary proverbial pinch on the arm.
Ever had that feeling where you gaze upon a stock that's embedded in an industry as evergreen as the ancient trees? In the world of investing, there's a niche that stands as firm and unshakable as a century-old oak. You guessed it right – it's the healthcare industry.
Now, why does healthcare have such an eternal appeal? Simple – as long as we're breathing, we need healthcare. It's not a fleeting trend but a perennial necessity. This is the very lifeblood that ensures a higher quality of life.
Enter Abbott Laboratories (ABT).
Glance at the earnings numbers released last month, and you may think it's just another healthcare giant. But wait until you see the ripples beneath the surface.
Though COVID testing sales are receding, there's growth flourishing elsewhere, even leading to some optimistic nudges from analysts. A 1% dip in share price this year? That's merely a disguise. So the real question is, could Abbott be your golden ticket?
Take a look at the Q2 2023. The juggernaut showed robust organic sales growth across three main segments: medical devices, established pharmaceuticals, and nutrition. Recovery from the pandemic-induced slump, coupled with strong demand for FreeStyle Libre, Abbott's continuous glucose monitoring franchise, has fueled this impressive ascent.
But don't take this surge for granted. Abbott's double-digit organic sales growth for the year is not just another feat; it's a majestic leap for a company with a more moderate growth history.
A detailed dig into the numbers reveals revenues of just under $10 billion for the period ended June 30, an 11% decline YoY.
The COVID testing inflated diagnostics sales have dwindled, pulling down the overall figure. But let's shift the spotlight to Abbott's medical device business.
A growth rate of nearly 14% to a staggering $4.3 billion. In diabetes care alone, a 19% YoY rise. Sounds promising? Indeed, it does.
The company didn't stop at this.
With the acquisition of Cardiovascular Systems and strong results in nutrition and pharmaceutical segments, Abbott is growing into a multifaceted marvel in healthcare.
Look at the kaleidoscope of sales posted by Abbott Laboratories across four business segments in 2022.
Diagnostics, medical devices, nutrition, established pharmaceuticals - a dizzying $43.7 billion sales figure.
A 27.5% rise in non-GAAP diluted EPS is expected by 2026. A 1.9% dividend yield surpassing the S&P 500 index's 1.5%. A below-average forward P/E ratio of 22.9. Analysts targeting a 12-month share price of $125. It all screams "BUY!"
However, let's not get carried away.
A 24-times multiple of the company's future earnings might look lofty, considering the industry average is less than 19. It might seem too rich unless you're betting big on a healthcare recovery or Abbott's Libre 3 device.
Growth investors may shrug it off, but dividend enthusiasts, sit up.
With an above-average dividend yield of 1.9% and a royal status as a Dividend King, Abbott could be a charming buy. It's not just an investment but a long-term relationship where the recurring income grows over time, all while cushioned by diverse operating segments.
Abbott might not give you a thrill ride, but it's a rock-solid healthcare foundation to fortify your portfolio, especially if you prefer a steady hand and a dependable dividend.
Needless to say, this business is an excellent addition to your portfolio. After all, Abbott Laboratories is not a flash in the pan. It's a beacon in the healthcare universe that could either be a hidden treasure or a prudent safeguard, depending on your strategy.
In the grand chessboard of investment, it might just be your masterstroke.
