Q3 2024 Earnings Summary
- Abbott's Diabetes Care segment achieved strong growth, with 21% overall increase in FreeStyle Libre sales and 26% growth in the U.S., positioning the product to exceed $6 billion in revenue this year and ahead of the goal of $10 billion by 2028 . The successful U.S. launch of Lingo, targeting non-diabetic individuals, is showing very strong early interest and higher than expected reorder rates, indicating additional growth opportunities .
- Structural Heart sales grew 25% globally and 40% in the U.S., driven by strong performance in Left Atrial Appendage (LAA) closure and tricuspid devices . Positive clinical data, such as 95% closure rates for Amulet sustained after 45 days, and the development of Amulet 2.0, along with investments in clinical trials and potential expanded coverage, support continued growth .
- Abbott expects continued high single-digit revenue growth and 10% EPS growth into 2025, supported by a strong pipeline with recently launched products contributing around $1 billion in revenue this year, expected to double next year . The company is focusing on gross margin expansion and disciplined investment allocation, positioning it for operating margin improvement .
- Abbott is facing significant legal liabilities related to NEC infant formula lawsuits, which may impact its financial position and could potentially lead to product withdrawal from the U.S. market if unresolved .
- The judge in the current trial has not allowed key evidence (the joint statement from FDA, CDC, and NIH) to be entered into evidence, potentially increasing the risk of unfavorable legal outcomes for Abbott .
- Abbott intends to resolve these lawsuits faster than the typical decade-long litigation process, which may result in financial strain and increased liabilities .
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2025 Guidance
Q: Are high single-digit revenue and 10% EPS growth reasonable for 2025?
A: Robert Ford acknowledged that analyst estimates of high single-digit revenue growth and 10% EPS growth for 2025 are a reasonable starting point. Without the "COVID cloud" affecting comparisons, the company is well-positioned to achieve these targets, driven by its $40 billion revenue base and strong pipeline. -
Libre Growth and CGM Market
Q: How is Libre performing, and what's the outlook for the CGM market?
A: Libre grew 21% globally and 26% in the U.S. in Q3. Abbott views the CGM market as a mass market opportunity, aiming for Libre to be a $6 billion-plus product growing 20% this year. The company is ahead of its target 15% CAGR to reach $10 billion in sales by 2028. The launch of Lingo, targeting non-diabetics, has shown strong early interest, with higher reorder rates than in the UK. -
Confidence in Full-Year Guidance
Q: How confident are you in maintaining full-year guidance despite underperformance in Nutrition and Diagnostics?
A: Despite underperformance in Nutrition and Diagnostics, Abbott remains confident in its full-year revenue guidance of 9.5% to 10% growth. Issues in Nutrition were due to temporary challenges in international pediatric markets, which are being addressed. Core Lab Diagnostics was impacted by the VBP implementation in China, but excluding China, international Core Lab was up double digits. The diversified portfolio allows overperformance in other areas to compensate. -
Investment Spending and Share Buyback
Q: How are you managing investment spending and the share repurchase program?
A: Abbott reduced expenses from 37% in 2019 to about 34% this year, achieving $1 billion in spending leverage over five years. Investments focus on high-growth areas like EP, structural heart, and diagnostics. The Board approved a new $7 billion buyback program, with $750 million repurchased in Q3. The buybacks aim to correct a perceived disconnect in the PE ratio, not to drive EPS through share count reduction.