Abbott Laboratories (NYSE: ABT)

Sector: Healthcare Industry: Medical Devices CIK: 0000001800
Market Cap 173.80 Bn
P/B 8.33
P/E 32.73
P/S 5.47
ROIC (Qtr) 9.06
Div Yield % 2.02
Rev 1y % (Qtr) 6.90
Total Debt (Qtr) 12.94 Bn
Debt/Equity (Qtr) 0.25
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About

Abbott Laboratories, known on the New York Stock Exchange as ABT, is a prominent player in the pharmaceutical, diagnostic, and medical device industries. Established in 1900, the company has built a reputation for its extensive global presence and diverse product portfolio. Abbott's primary business activities encompass the discovery, development, manufacture, and sale of a broad spectrum of healthcare products. These activities are organized into four segments: Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and...

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Investment thesis

Bull case

  • Strong operating cash flow of 9.12B provides robust 0.70x coverage of total debt 12.94B, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 7.51B provide 5.58x coverage of short-term debt 1.34B, demonstrating strong liquidity position and minimal refinancing risk.
  • Strong tangible asset base of 54.61B provides 4.22x coverage of total debt 12.94B, indicating robust asset backing and low credit risk.
  • Operating cash flow of 9.12B provides strong 13.77x coverage of stock compensation 662M, indicating sustainable incentive practices.
  • Operating cash flow of 9.12B provides exceptional 17.92x coverage of interest expenses 509M, showing strong debt service capability.

Bear case

  • Operating cash flow of 9.12B barely covers its investment activities of (2.38B), with a coverage ratio of -3.84, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Investment activities of (2.38B) provide weak support for R&D spending of 2.96B, which is -0.80x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Operating cash flow of 9.12B provides thin coverage of dividend payments of (4.04B) with a -2.25 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 7.51B provide limited coverage of acquisition spending of (85M), which is -88.36x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Operating cash flow of 9.12B provides minimal -1.56x coverage of tax expenses of (5.84B), suggesting potential tax planning inefficiencies or unsustainable tax positions.

Segments Breakdown of Revenue (2019)

Peer comparison

Companies in the Medical Devices
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 ABT Abbott Laboratories 173.80 Bn 32.73 5.47 12.94 Bn
2 SYK Stryker Corp 141.15 Bn 43.48 5.62 15.86 Bn
3 MDT Medtronic plc 123.47 Bn 25.92 3.55 29.10 Bn
4 BSX Boston Scientific Corp 112.80 Bn 38.92 5.62 11.44 Bn
5 EW Edwards Lifesciences Corp 45.66 Bn 33.38 7.76 0.70 Bn
6 DXCM Dexcom Inc 27.52 Bn 32.91 5.90 1.34 Bn
7 STE STERIS plc 24.13 Bn 34.08 4.14 2.05 Bn
8 PODD Insulet Corp 17.33 Bn 70.38 6.87 1.01 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 2.16 2.13
EV to Cash from Ops. EV/CFO 22.40 2.75
EV to Debt EV to Debt 14.02 17.25
EV to EBIT EV/EBIT 25.57 2.89
EV to EBITDA EV/EBITDA 20.54 4.53
EV to Free Cash Flow [EV/FCF] EV/FCF 25.86 29.36
EV to Market Cap EV to Market Cap 1.04 25.09
EV to Revenue EV/Rev 5.72 32.80
Price to Book Value [P/B] P/B 8.33 4.73
Price to Earnings [P/E] P/E 32.73 -2.04
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 3.46 40.22
Dividend Payout Ratio % Div Payout % (Qtr) 29.00 1.59
Dividend per Basic Share Div per Share (Qtr) 2.36 0.10
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 59.45 -0.37
Interest Coverage Int. cover (Qtr) 16.99 196.93
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 1.78 -152.08
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -0.62 8,476.58
Dividend Growth (1y) % Div 1y % (Qtr) 7.27 -0.44
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 137.16 -792.16
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 9.34 3.79
EBIT Growth (1y) % EBIT 1y % (Qtr) 17.49 -301.80
EBT Growth (1y) % EBT 1y % (Qtr) 20.06 -121.44
EPS Growth (1y) % EPS 1y % (Qtr) 142.42 -87.51
FCF Growth (1y) % FCF 1y % (Qtr) 6.65 10.43
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 7.02 38.21
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.52 0.55
Cash Payout Ratio Cash Payout (Qtr) 0.36 0.02
Cash Ratio Cash Ratio (Qtr) 0.52 1.80
Current Ratio Curr Ratio (Qtr) 1.70 4.18
Debt to Equity Ratio Debt/Equity (Qtr) 0.25 1.20
Interest Cover Ratio Int Coverage (Qtr) 16.99 196.93
Times Interest Earned Times Interest Earned (Qtr) 16.99 196.93
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 26.90 -2,396.63
EBIT Margin % EBIT Margin % (Qtr) 19.72 -2,478.60
EBT Margin % EBT Margin % (Qtr) 18.56 -2,690.42
Gross Margin % Gross Margin % (Qtr) 55.90 30.80
Net Profit Margin % Net Margin % (Qtr) 31.90 -2,821.53