On Monday, Barclays (LON:BARC) maintained an Overweight rating on Abbott Labs (NYSE:ABT) shares and increased the price target to $149 from $143. The adjustment follows a favorable verdict for Abbott in a recent NEC lawsuit in St. Louis. The analyst from Barclays indicated that despite the stock's recent gains, including an 18% rise from its July lows, there is over 25% upside to their new target for the company's shares.
The verdict, which was announced last week, has been seen as a positive development for Abbott, as it potentially reduces the financial impact of NEC litigation on the company. Barclays has estimated the total industry settlement for NEC-related liability to be between $2.4 billion and $9.8 billion, with Abbott's share now expected to be at the lower end, around $1 billion to $3 billion. This assessment is based on an analysis published on August 28.
In support of the Overweight rating and the increased price target, Barclays referenced an updated sum-of-parts (SOP) valuation model. This model suggests that Abbott's stock is trading at approximately a 25% discount to the combined value of its diversified medical device and diabetes businesses. The analyst believes that as the overhang of NEC liability continues to diminish, there will be significant additional upside for Abbott's stock.
The favorable NEC verdict and the subsequent price target increase reflect a positive outlook for Abbott Labs. Barclays' analysis points to a reduced financial burden from litigation and an undervalued stock price relative to the company's business segments. Abbott Labs' share price is expected to reflect these developments in the coming months.
In other recent news, Abbott Laboratories (NYSE:ABT) reported strong third-quarter earnings, surpassing market expectations with revenues of $10.64 billion. The company's GAAP earnings per share reached $0.94, in line with predictions from firms like Oppenheimer and TD Cowen.
Abbott's Medical Devices segment stood out, achieving revenues of $4.75 billion, marking a 13.3% organic growth. The company also raised its full-year EPS guidance for the third time this year, now forecasting between $4.64 and $4.70.
In a legal development, Abbott, along with a Reckitt unit, won a significant court case, reducing potential liability in ongoing lawsuits related to their premature baby formulas. Analysts from J.P.Morgan and Evercore noted this victory could decrease Abbott's total liability by $500 million to $1 billion and strengthen their position in future trials.
Analyst firms including TD Cowen, JPMorgan (NYSE:JPM), Jefferies, and Stifel have all maintained or increased their price targets for Abbott, reflecting confidence in the company's growth prospects. Piper Sandler adjusted its outlook on Abbott, increasing the price target to $133 from the previous $131 while maintaining an Overweight rating on the stock.
Oppenheimer maintained a positive stance on Abbott, reiterating an Outperform rating and a $130.00 price target. These updates from analysts are part of recent developments for the company.
InvestingPro Insights
Building on Barclays' optimistic outlook for Abbott Labs (NYSE:ABT), recent data from InvestingPro provides additional context to the company's financial health and market position. Abbott's market capitalization stands at an impressive $205.71 billion, underscoring its significant presence in the healthcare sector. The company's revenue for the last twelve months as of Q3 2024 reached $41.22 billion, with a notable revenue growth of 4.85% in the most recent quarter.
InvestingPro Tips highlight Abbott's strong dividend history, having raised its dividend for 11 consecutive years and maintained payments for 54 years. This consistent dividend growth, coupled with a current yield of 1.85%, aligns with the company's stable financial position mentioned in the Barclays analysis. Additionally, Abbott's low price volatility and its trading near its 52-week high (97.5% of the high) support the positive sentiment expressed in the article.
The company's profitability is further emphasized by InvestingPro data, showing a gross profit of $23.04 billion and an operating income margin of 18.44% for the last twelve months. These figures reinforce Abbott's strong market position and financial performance, which could contribute to the potential upside suggested by Barclays.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips on Abbott Labs, providing a deeper understanding of the company's financial health and market prospects.
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