Thanks to the COVID-19 testing growth, after reporting solid second quarter results and strong outlook for fiscal 2020 last Thursday, shares of Abbott Laboratories (NYSE: ABT) ended up 2.96% at $99.25 on Friday. From its yearly low of $61.61 on March 23, ABT stock surged to a 52-week high ($100.00) in less than a month’s time. Abbott stock again touched the triple digit mark on Friday and if the positive momentum continues, it could establish a fresh 52-week high in the coming week itself.
COVID-19 testing
COVID-19 diagnostic testing-related sales amounted to $615 million in the second quarter for Abbott. Over the first half of the year, Abbott developed and launched five COVID-19 tests for both laboratory and rapid point-of-care settings. So far, the company had sold about 40 million tests across all of its platforms around the globe.
Molecular testing, which detects if someone currently has the virus, has been in high demand after the spread started. With the phased easing of stay-at-home restrictions, COVID-19 testing entered a new phase where continued testing of symptomatic patients starting to overlap with broader surveillance testing of asymptomatic patients. This will help in tracking, understanding and containing the spread of the virus until the COVID-19 vaccine is available.
In addition to molecular testing, Abbott anticipates increased demand for other types of tests, including both antigen and antibody. As vaccines become available, Abbott anticipates continued surveillance testing to monitor and assess for both natural and vaccine-related immune response.
Future of COVID-19 testing
Abbott continues to lead in the area of diagnostic testing for COVID-19 and expects to carry this forward beyond this year.
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When answering a question on the future of COVID-19 testing, CEO Robert Ford said,
“We see the — that COVID testing will stick around. Even when you have a vaccine, I think that I can see patients going to physician’s office with a fever, and they want to know is it influenza? Is it the flu? Is it COVID? So yes, so we think that the capacity that we’re building is not only for, I’d say, a high demand during the next 12, 18, 24 months here, but we do the — a steady state, as I said, that it will continue to be there.”
Q2 results
Despite registering a year-over-year drop in earnings and revenue for the second quarter, the Illinois-based firm’s bottom and top line results surpassed consensus estimates. Abbott ended the second quarter with approximately $5 billion of cash and short-term investments, an increase of more than $1 billion compared to the end of the first quarter.
During Q2, the company also announced its 386th consecutive quarterly dividend payment and this year marks the 48th straight year that Abbott has increased its dividend payment.
Outlook
Abbott guided its fiscal 2020 adjusted earnings to be at least $3.25 per share factoring in the recovery in diagnostic and device businesses and nutrition business, demand for COVID-19 testing, recent product launches, and procedure growth in some countries. The current year’s EPS projection was better than the market’s expectations. When an analyst asked whether fiscal 2020’s revenue growth would grow around in the mid-single-digit range, CEO Robert Ford confirmed It and added,
“Depending on how some of this manufacturing ramp-up occurs and the scaling of it occurs on the COVID side, the rolling out of our new tests, we could be ahead of that. And that would then imply a different kind of a different type of growth rate for the full year. But even at the $3.25, we’re definitely accelerating our growth rate versus where we were at pre-COVID levels.”
What’s next?
Other than Abbott, Danaher (NYSE: DHR) and Thermo Fisher Scientific (NYSE: TMO) are doing testing for COVID-19 with their testing kits. Even if a vaccine or a drug is developed to treat COVID-19, testing would remain here for a long time, which would benefit the medical device makers like Abbott. However, Abbott’s long-term success would rely on other areas including a strong performance in Established Pharmaceuticals and Medical Devices segments as well as its success in developing and selling the new products that are currently in the pipeline.
To read the entire transcript of Abbott Q2 2020 earnings call, click here