(Bloomberg) -- Abbott Laboratories narrowed its full-year profit outlook, raising the midpoint slightly, as strong demand for its diabetes devices continued driving growth.
Adjusted earnings will be from $4.64 to $4.70 a share, the Abbott Park, Illinois-based company said Wednesday, compared with the earlier range of $4.61 to $4.71. Sales of diabetes devices rose 19% in the third quarter, as overall revenue edged above estimates.
Abbott’s device business has been a bright spot during the year as the company earlier raised its profit forecast. Sales of those products remained robust with growth in electrophysiology devices and blood sugar monitors, according to Bloomberg Intelligence analyst Matt Henriksson.
Still, there are “moving parts” that need more attention, Henriksson said in a note. “A softer-than-expected quarter in nutrition was offset by Covid testing sales exceeding estimates.”
In October, Abbott’s board of directors authorized a new repurchase program of up to $7 billion of the company’s common shares, according to the statement. The shares gained as much as 2.3% at the New York market open after rising 5.4% this year through Tuesday’s close.
Formula Litigation
Litigation related to Abbott’s formula has been a drag on investor sentiment. In July, Abbott was ordered by a jury to pay almost $500 million over allegations that it hid the risk that its premature infant formula causes a dangerous intestinal disease called necrotizing enterocolitis, or NEC.
Abbott has disputed the alleged link between its products and the condition. Earlier this month, the US Food and Drug Administration, Centers for Disease Control and Prevention and National Institutes of Health issued a joint consensus statement saying there’s “no conclusive evidence” that the formula causes NEC and that human milk may protect against the condition.
“Available evidence supports the hypothesis that it is the absence of human milk – rather than the exposure to formula – that is associated with an increase in the risk of NEC,” the agencies said.
The company is facing thousands of formula-related lawsuits in US courts. Chief Executive Officer Robert Ford told investors last quarter that Abbott was considering pulling its premature infant formula from the market due to the litigation. The specialty products generate sales of just $9 million annually for Abbott, but the total costs of settlements and verdicts in NEC cases could be as much as $2.5 billion, according to Bloomberg Intelligence.
The total settlement amount is likely to be shared between Abbott and Reckitt Benckiser Group Plc, the maker of Enfamil, based on market share of hospital contracts, Bloomberg Intelligence said.
While Abbott likely has the financial flexibility to defend itself, the litigation may be an overhang on its shares for “the next couple of years,” Edward Jones analyst John Boylan said in a note before the earnings.
(Adds consensus statement on NEC in second section.)
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