ABT: Legal Wins And Device Momentum Will Support Durable Growth Ahead

Key Takeaways

• Strong demand from emerging markets and aging populations, along with new product launches, is expected to fuel sustained growth and diversify revenue streams.
  
• Innovation in high-margin medical technologies and a diversified business mix will drive market share gains and support stable, long-term earnings.
  
• Margin and revenue growth are threatened by pricing pressures, regulatory risks, intensifying competition, global volatility, and increased investment requirements across Abbott's core business segments.

Catalysts

Abbott Laboratories, together with its subsidiaries, discovers, develops, manufactures, and sells health care products worldwide.

• The expansion of healthcare access and rising middle class in key emerging markets (such as India, China, Latin America, and the Middle East) is fueling robust growth in branded generics and biosimilars, highlighted by Abbott's record sales in these regions and imminent biosimilar launches; this trend is poised to drive sustained double-digit top-line growth and greater geographic revenue diversification.
  
• The global demographic shift toward an aging population and increasing prevalence of chronic and lifestyle-related diseases (e.g., diabetes, cardiovascular disease) is underpinning strong, recurring demand for Abbott's diagnostics, nutrition (e.g., Ensure, Glucerna), and high-growth medical device franchises-supporting revenue acceleration and enhanced operating leverage.
  
• Abbott's ongoing innovation in high-margin segments, most notably through the FreeStyle Libre franchise (with next-gen, dual-analyte sensors and new software integrations) and pipeline launches in structural heart and rhythm management devices, positions the company to capture incremental market share and drive net margin expansion.
  
• Recent headwinds (COVID testing declines, China diagnostics procurement, and HIV funding) are transient and expected to lapse by 2026, while new product launches (biosimilars, next-gen devices, systems integration) and regulatory expansions are set to accelerate revenue growth and improve earnings visibility.
  
• Abbott's ability to leverage existing infrastructure and cross-segment synergies in emerging markets, coupled with a diversified business mix across nutrition, diagnostics, devices, and established pharmaceuticals, reduces earnings volatility and should support stable long-term earnings and margin improvement.

Abbott Laboratories Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Abbott Laboratories's revenue will grow by 7.3% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 32.3% today to 17.6% in 3 years time.
• Analysts expect earnings to reach $9.4 billion (and earnings per share of $5.39) by about August 2028, down from $13.9 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $8.2 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 33.1x on those 2028 earnings, up from 16.2x today. This future PE is greater than the current PE for the GB Medical Equipment industry at 27.3x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.61%, as per the Simply Wall St company report.

Abbott Laboratories Future Earnings Per Share Growth

Risks

• Diagnostic sales are experiencing significant headwinds due to declining COVID testing demand, ongoing effects from volume-based procurement (VBP) in China, and reduced US foreign aid funding for HIV testing; if VBP-related price erosion or Chinese market volatility persists or worsens, it could create persistent downward pressure on Diagnostic division revenues and overall company top-line growth.
  
• The company faces exposure to tariffs (expected ~$200 million impact) and adverse foreign exchange movements (ongoing EPS headwind of up to 4%), both of which could compress operating margins and earnings, particularly if trade tensions or global currency volatility intensifies.
  
• Competitive bidding initiatives for continuous glucose monitors (CGM) in the US, coupled with rising competition from other CGM providers and potential commoditization of diagnostic and device platforms, threaten Abbott's pricing power and could erode net margins and long-term revenue growth in its core diabetes franchise.
  
• While international expansion, especially in emerging markets and branded generics, is currently driving growth, overdependence on these geographies exposes Abbott to risks from changing regulatory policies, government price controls, and currency fluctuations, potentially making future earnings less predictable.
  
• Ongoing litigation risk (e.g., infant formula MDL), regulatory hurdles (including potential for stricter or lengthier device and biosimilar approval processes), and the need for significant R&D and SG&A investment to support new product development and launches may raise costs, delay time-to-market, and impact overall profitability and net margins over time.

Valuation

• The analysts have a consensus price target of $142.485 for Abbott Laboratories based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $159.0, and the most bearish reporting a price target of just $122.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $53.3 billion, earnings will come to $9.4 billion, and it would be trading on a PE ratio of 33.1x, assuming you use a discount rate of 7.6%.
• Given the current share price of $129.4, the analyst price target of $142.48 is 9.2% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.