If a company’s history and track record were good enough reasons to buy its shares, it’d be easy to make a case for investing in Abbott Laboratories (NYSE: ABT). Abbott is a longtime leader in the healthcare sector, and has generally delivered excellent returns to long-term shareholders.
However, that’s no guarantee of future returns. And detractors will point out that Abbott has encountered some headwinds lately, especially on the legal and regulatory fronts. Is the company still worth a look if you’re a long-term investor?
Abbott Laboratories is one of the world’s leading medical device makers. It routinely develops and markets newer products, and its portfolio boasts dozens of patented devices that generate consistent sales. However, Abbott also has its hands in three other segments: nutrition (where it is also one of the leaders), established pharmaceuticals, and diagnostics. Diversification has its perks; it allows the company not to be too reliant on a single business unit.
When its nutrition segment encountered some issues — it had to recall some of its baby formula products a couple of years ago due to potential infection — the rest of its business picked up the slack. When demand for some of its medical devices fell off a cliff because of the pandemic, practically overnight, the company relied on its diagnostic business to keep things afloat.
So despite these disruptions, Abbott’s financial results have been somewhat consistent in recent years:
ABT Revenue (Quarterly) data by YCharts.
Abbott’s diversified business, innovative abilities, and deep expertise in the industry should allow it to perform well over the long run, especially as it has lucrative opportunities ahead. Among them is its diabetes care segment, spearheaded by a continuous glucose monitoring (CGM) franchise, the FreeStyle Libre. Over the past few years, this product line has been Abbott’s most important growth driver.
The company is doubling down. It recently launched an over-the-counter CGM option for diabetes patients in the U.S. called the Libre Rio. For consumers without diabetes, it now also has an over-the-counter CGM option called the Lingo.
Its CGM franchise has a vast runway for growth. Earlier this year, the company estimated that of the half-billion adults worldwide it believes have diabetes, only 1% have access to CGM technology. Abbott is a leader in the field, and currently serves only about 6 million patients. That’s a massive long-term opportunity.
Abbott Laboratories is also an excellent dividend stock, currently on a streak of 52 consecutive payout increases. If you opt to reinvest the dividend — currently yielding 1.8% — you’ll see returns boosted over the long term.
Every company faces headwinds. Let’s consider two that Abbott has encountered.
First, as mentioned earlier, it’s faced legal and regulatory issues. Abbott’s baby formula problems led to lawsuits. In July, the company had to dish out $495 million after a court ruled that its formula caused a premature baby to develop a dangerous bowel disease. There are many more similar lawsuits in the pipeline.
Abbott has also had to recall some FreeStyle Libre sensors due to possibly inaccurate glucose readings, though this recall was for a small number of devices. These legal and regulatory problems have yet to cause serious, long-term harm to the company. But things could get worse for it as time passes.
Second, Abbott Labs faces competition from DexCom in the CGM market. The two are the leaders in the field, and have been battling for market share for years. Thankfully, Abbott’s CGM unit has thrived despite the competition from DexCom, but that’s something to keep in mind.
In my view, the bull case for Abbott Laboratories is stronger than the bear thesis. The company is no stranger to facing lawsuits, which are typical for corporations that have been around as long as it has. It’s unlikely that this new wave of legal problems will sink Abbott’s business.
And in the meantime, the company’s long-term opportunities, innovative abilities, and reliable dividend program all make it attractive. Abbott Laboratories is still worth investing in.
Before you buy stock in Abbott Laboratories, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Abbott Laboratories wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $806,459!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of October 14, 2024
Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories. The Motley Fool recommends DexCom. The Motley Fool has a disclosure policy.
—
Blog powered by G6
Disclaimer! A guest author has made this post. G6 has not checked the post. its content and attachments and under no circumstances will G6 be held responsible or liable in any way for any claims, damages, losses, expenses, costs or liabilities whatsoever (including, without limitation, any direct or indirect damages for loss of profits, business interruption or loss of information) resulting or arising directly or indirectly from your use of or inability to use this website or any websites linked to it, or from your reliance on the information and material on this website, even if the G6 has been advised of the possibility of such damages in advance.
For any inquiries, please contact [email protected]
