Why did reported sales grow only 2.2% when organic growth was 10.8%?

The gap is mainly due to COVID-19 testing, which reduced growth by about 6.1 percentage points as those sales fell from $730 million to $204 million. Foreign exchange was a further 2.9-point headwind, partly offset by a 0.4-point contribution from the CSI acquisition. Excluding COVID testing, the underlying business grew strongly.

Why did GAAP earnings decline even though sales grew?

Operating expenses grew faster than sales. SG&A rose 7.1% and cost of products sold rose 3.0%, while intangible amortization fell 3.9%. Operating earnings dropped 8.1%. Diluted GAAP EPS fell to $0.70 from $0.75, and specified items of $0.28 per share (largely intangible amortization, restructuring and acquisition costs) were excluded from adjusted EPS of $0.98.

What is driving growth in Medical Devices?

Growth was broad, with Medical Devices up 14.2% reported and 14.3% organic. Diabetes Care grew 19.5%, Electrophysiology 16.2% and Neuromodulation 15.3%. Recently launched products such as Amplatzer Amulet, Navitor, TriClip and AVEIR contributed, and International Electrophysiology grew 23.0% organically.

Did Abbott change its full-year outlook?

Yes, it narrowed and raised the midpoint of its guidance. Adjusted diluted EPS is now projected at $4.55 to $4.70 and GAAP diluted EPS at $3.25 to $3.40. Organic sales growth excluding COVID testing is projected at 8.5% to 10.0%. Abbott did not provide a GAAP reconciliation for that sales metric because it cannot reliably predict foreign exchange or COVID testing demand.

Is the dividend safe?

Abbott declared a quarterly dividend of $0.55 per share, payable May 15, 2024, to holders of record on April 15, 2024. This marks its 401st consecutive quarterly dividend and the 52nd consecutive year of dividend increases. Based on adjusted EPS guidance of $4.55 to $4.70, the annual dividend of $2.20 represents roughly 47% to 48% of projected adjusted earnings, though the filing itself does not comment on dividend sustainability.

ABT 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed April 17, 2024. Cited figures are marked; the original filing is the authoritative source.

Abbott Laboratories (ABT) reported first-quarter 2024 results on April 17, 2024, with sales of $9.964 billion^a, up 2.2% reported and 10.8% organic excluding COVID-19 testing sales, marking the fifth consecutive quarter of double-digit organic growth in its underlying base business.

Growth was led by Medical Devices (sales up 14.2% reported, with Diabetes Care, Electrophysiology, Neuromodulation and Structural Heart all growing double digits) and Established Pharmaceuticals (organic growth of 13.7%). Nutrition grew 5.1% reported, driven by Pediatric Nutrition in the U.S. The headline reported growth was held back by a steep decline in COVID-19 testing sales, which fell to $204 million^b from $730 million a year earlier, weighing heavily on Diagnostics, where reported sales fell 17.6%. Profitability was weaker on a GAAP basis.

Diluted GAAP EPS was $0.70^c, down 6.7% from $0.75, and net earnings fell 7.0% to $1.225 billion. Adjusted diluted EPS, which excludes specified items such as intangible amortization, restructuring and acquisition costs, was $0.98, down 4.9% from $1.03. Operating earnings declined 8.1%, as SG&A rose 7.1% and cost of products sold rose 3.0%, outpacing sales growth.

Management nonetheless narrowed its full-year 2024 guidance and raised the midpoint, now projecting GAAP diluted EPS of $3.25 to $3.40^d and adjusted diluted EPS of $4.55 to $4.70, and projected organic sales growth excluding COVID-19 testing of 8.5% to 10.0%. Abbott also declared its 401st consecutive quarterly dividend of $0.55 per share, payable May 15, 2024.

For investors, the key takeaways are the strength of the underlying growth engine in devices and emerging-market pharma against a shrinking COVID testing revenue base, and the question of whether margin and expense pressure will ease as the year progresses. Second-quarter guidance calls for adjusted EPS of $1.08 to $1.12 and GAAP EPS of $0.69 to $0.73.

02—Key points

Key Highlights

Reported sales rose 2.2% to $9.964 billion; organic growth excluding COVID-19 testing was 10.8%, the fifth straight quarter of double-digit underlying growth.
Medical Devices sales grew 14.2% to $4.453 billion, led by Diabetes Care (+19.5%, with FreeStyle Libre at $1.5 billion), Electrophysiology (+16.2%) and Structural Heart (+11.7%).
COVID-19 testing sales fell to $204 million from $730 million, dragging Diagnostics reported sales down 17.6%; excluding COVID testing, Diagnostics grew 5.4% organically.
GAAP diluted EPS was $0.70 (down 6.7%) and adjusted diluted EPS was $0.98 (down 4.9%); operating earnings fell 8.1% as SG&A rose 7.1%.
Full-year 2024 guidance was narrowed and the midpoint raised: GAAP EPS of $3.25 to $3.40 and adjusted EPS of $4.55 to $4.70; organic growth excluding COVID testing of 8.5% to 10.0%.
Second-quarter 2024 guidance projects adjusted diluted EPS of $1.08 to $1.12 and GAAP diluted EPS of $0.69 to $0.73.
Abbott declared its 401st consecutive quarterly dividend of $0.55 per share, payable May 15, 2024, and has increased its dividend for 52 consecutive years.

03—Questions

Frequently Asked Questions

Why did reported sales grow only 2.2% when organic growth was 10.8%?
The gap is mainly due to COVID-19 testing, which reduced growth by about 6.1 percentage points as those sales fell from $730 million to $204 million. Foreign exchange was a further 2.9-point headwind, partly offset by a 0.4-point contribution from the CSI acquisition. Excluding COVID testing, the underlying business grew strongly.
Why did GAAP earnings decline even though sales grew?
Operating expenses grew faster than sales. SG&A rose 7.1% and cost of products sold rose 3.0%, while intangible amortization fell 3.9%. Operating earnings dropped 8.1%. Diluted GAAP EPS fell to $0.70 from $0.75, and specified items of $0.28 per share (largely intangible amortization, restructuring and acquisition costs) were excluded from adjusted EPS of $0.98.
What is driving growth in Medical Devices?
Growth was broad, with Medical Devices up 14.2% reported and 14.3% organic. Diabetes Care grew 19.5%, Electrophysiology 16.2% and Neuromodulation 15.3%. Recently launched products such as Amplatzer Amulet, Navitor, TriClip and AVEIR contributed, and International Electrophysiology grew 23.0% organically.
Did Abbott change its full-year outlook?
Yes, it narrowed and raised the midpoint of its guidance. Adjusted diluted EPS is now projected at $4.55 to $4.70 and GAAP diluted EPS at $3.25 to $3.40. Organic sales growth excluding COVID testing is projected at 8.5% to 10.0%. Abbott did not provide a GAAP reconciliation for that sales metric because it cannot reliably predict foreign exchange or COVID testing demand.
Is the dividend safe?
Abbott declared a quarterly dividend of $0.55 per share, payable May 15, 2024, to holders of record on April 15, 2024. This marks its 401st consecutive quarterly dividend and the 52nd consecutive year of dividend increases. Based on adjusted EPS guidance of $4.55 to $4.70, the annual dividend of $2.20 represents roughly 47% to 48% of projected adjusted earnings, though the filing itself does not comment on dividend sustainability.

04—Continue

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