16 April 2020

Abbott Labs May Be Immune to Coronavirus

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What’s happening: Abbott Laboratories is scheduled to report its first-quarter results before the opening bell on Thursday, April 16.

What happened: Although Abbott has maintained a strong track record of sales growth over the past three years, expectations are for a decline in sales in the first quarter. The decline, however, is likely to be marginal and investor sentiment remains bullish for the healthcare company, sending its stock higher amid the wider market downturn.

Even as its peers reel under pressure from the coronavirus impact, Abbott seems mostly resilient to this.

The coronavirus pandemic has impacted the growth of medical device companies with elective surgeries being delayed or cancelled. The Illinois-based company, however, is unlikely to suffer a great impact. That's because it sells a wide range of medical devices, catering to procedures like cardiovascular surgeries which cannot be delayed.

  • The consensus revenue estimate for the first quarter stands at $7.47 billion, representing a 0.9% year-over-year decline.
  • The company is expected to report earnings of 61 cents per share, a 3.2% decline from the same quarter a year earlier.

Why it matters: With some strategic innovations, Abbott’s diagnostics business has been showing strength even during the coronavirus crisis.

Although the core laboratory business has been suffering since the stay-at-home orders began in the country, the company expects its point-of-care segment to be profitable following its March launch of the fastest-available molecular point-of-care test for coronavirus testing. The test, which can deliver positive results within five minutes, has been well received globally

Abbott received Emergency Use Authorization from the US FDA (Food and Drug Administration) for its m2000 molecular laboratory system for coronavirus on March 18. The company also announced on Wednesday the launch of its new antibody testing for COVID-19.

How the shares have performed so far: Abbott has avoided the overall market crash amid coronavirus fears. The company’s stock has surged more than 11% over the past month and has gained 5% year to date. Investors seem optimistic heading into quarterly earnings. Shares of Abbott rose more than 2% to close the session at $90.94 yesterday, only to climb another 2% in after-hours trading.

What to watch: Investors will be keeping an eye on comments from the company related to the coronavirus outbreak. So far, Abbott has not issued any warning of an impact on its profitability. Although sentiment remains positive, the company could witness a slight slowdown in its business and investors are looking for management comments around this during the company’s earnings call today.

The Markets Today

     

Investors will be focusing on European stocks today, ahead of industrial production data from the Eurozone.

Context: European stocks closed lower on Wednesday amid growing concerns over the extent of damage to the global economy from the coronavirus pandemic. Investors were also assessing dismal earnings reports from various major companies.

Details: Recent gains in equities were driven by optimism of a slowdown in coronavirus cases and plans announced by various governments to lift some lockdown restrictions.

While the UK and France are planning to extend lockdown measures till early May, Spain, Italy and Denmark intend to ease the lockdowns in their respective economies.

Even as containing the coronavirus has become a priority across the globe, US President Donald Trump on Tuesday announced plans to suspend funding the WHO, blaming the health agency for making mistakes that resulted in “so much death” related to COVID-19.

Investor confidence was shaken yesterday by the IMF’s warning issued on Tuesday, projecting the global economy to contract by 3% this year, versus its January prediction of 3.3% growth.

The pan-European Stoxx 600 index dropped 3.3%, with oil and gas stocks among the worst performers in Wednesday’s session and all major sectors trading in negative territory. The FTSE 100 index also declined by 3.3%, while German 30 was down by 3.8%.

Shares of British cinema firm Cineworld plummeted 22%, while German meal company Hellofresh bucked the market trend, gaining around 6%.

What to watch: Investors will be closely monitoring the daily coronavirus numbers. The number of positive COVID-19 cases in Italy has surpassed 165,150 with around 21,640 deaths. Spain has so far confirmed more than 180,650 cases with 18,810 fatalities. Germany and France have also confirmed more than 134,000 coronavirus cases each as per the latest data.

Markets are awaiting the industrial production report from the Eurozone, along with some data from Germany. The Eurozone industrial production, which rose 2.3% in January, is expected to decline 0.2% in February.

Other Markets: US indices closed lower on Wednesday, with the Dow, S&P 500 and Nasdaq 100 down by 1.86%, 2.20% and 1.44%, respectively.

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What else to watch today

     

Germany’s wholesale prices and inflation rate, Canada’s new motor vehicle sales and manufacturing sales, Russia’s producer prices and industrial production as well as the US initial jobless claims, housing starts, building permits, Philadelphia Fed manufacturing index and natural gas stocks change.

 

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