Why Abbott Laboratories Stock Tumbled on Thursday
Key Points
Investors had more of an issue with guidance.
The company cut its full-year forecast for adjusted profitability.
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Abbott Laboratories (NYSE: ABT) more or less met analyst estimates in its first quarter, the results of which were published early Thursday morning. This clearly wasn't good enough for investors, as those folks collectively traded out of the shares in the wake of the earnings release. At market close, Abbott's stock was down by 6%.
Expectations met
In the quarter, Abbott's sales totaled just under $11.2 billion, nearly 8% higher year over year. Net income not under generally accepted accounting practices (GAAP) improved at a more modest rate, advancing by 5% to slightly more than $2 million, or $1.15 per share.
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Non-GAAP (adjusted) profitability matched the consensus analyst forecast, while the average pundit estimate for sales was $11 billion.
During the quarter, Abbott said it particularly performed well in the medical devices category, which saw sales grow by 13% over the same period in 2025. Product segments that saw double-digit percentage improvements included electrophysiology, rhythm management, diabetes care, and heart failure.
An unkind cut
Since investors tend to be forward-looking, it wasn't the trailing results that discouraged them. Rather, it was Abbott's notable cut to its full-year profitability guidance that dampened sentiment. Late last month, the company's acquisition of the next-generation cancer diagnostics business Exact Sciences closed, and it's now factoring in anticipated share dilution in its guidance.
With that, Abbott reduced its full-year 2026 adjusted earnings per share estimate to $5.38 to $5.58, notably down from its previous forecast of $5.55 to $5.80. Comparable sales should rise by 6.5% to 7.5% over the 2025 result.
It's understandable that market players would react negatively to that rather aggressive profitability guidance cut. However, we should bear in mind that management still expects robust improvements in both metrics over 2025, even without the Exact Sciences contribution (in full-year 2025 as an independent company, it booked $3 billion in revenue). I like Abbott, and I'd buy its stock on the dip.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories. The Motley Fool has a disclosure policy.
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