Piper Sandler initiates Abbott Laboratories with "overweight" rating, $131 PT

Investing.com -- Piper Sandler initiated coverage on Abbott Laboratories (NYSE:ABT ) with an "overweight" rating and a price target of $131 per share. 

Piper Sandler emphasizes Abbott’s attractive valuation, strong financial outlook, and key business strengths that position it well in the large-cap medtech sector.

Central to Piper Sandler’s recommendation is Abbott's financial health and growth trajectory. Abbott’s revenues are projected to grow to $44.84 billion in 2025 from $41.68 billion in 2024, reflecting a 7.6% increase. 

This revenue growth is boosted by a return to double-digit earnings per share (EPS) growth in 2025, with adjusted EPS forecasted to rise to $5.14 in 2025 from $4.65 in 2024, a 10.5% rise. 

Abbott’s EPS is expected to climb to $5.74 in 2026, maintaining a strong growth rate of 11.7%. The company’s current price of $114.88, combined with its earnings prospects and valuation at 22.3x 2025 estimated EPS, provides what Piper Sandler describes as a compelling entry point for investors​.

The company’s medical technology segment, which accounts for approximately 44% of total revenue (excluding COVID-19 testing), is a particular standout. 

Piper Sandler projects this division to achieve double-digit growth from 2024 through 2026. Key products such as FreeStyle Libre, a continuous glucose monitoring (CGM) device, and MitraClip, used in structural heart therapy, are expected to remain strong growth drivers. 

Piper Sandler also flagged Abbott’s innovation pipeline, which is rich with new products and technological advancements. Among the most critical are the Lingo CGM, aimed at the wellness market, and the upcoming Volt pulsed field ablation (PFA) catheter, expected to launch in 2026. 

A critical element of Piper Sandler’s positive outlook on Abbott is the company’s ability to maintain double-digit EPS growth, particularly as it moves past the pandemic-driven fluctuations in COVID-19 testing revenues. 

The analysts project that Abbott will emerge from 2024 with stronger EPS growth, which they expect to continue into 2025 and 2026. The company’s solid performance across key sectors such as medical devices, diagnostics, pharmaceuticals, and nutrition is expected to drive this improvement​.

Abbott’s financial health, underscored by a strong balance sheet, further bolsters the bullish view. As of June 2024, Abbott held $7.0 billion in cash, with a manageable debt-to-EBITDA ratio of 0.64, which is favorable compared to its peers. 

Piper Sandler also noted Abbott’s consistent dividend payments, which provide additional stability for investors. Abbott has a history of paying dividends for 402 consecutive quarters, with its annual dividend yield standing at 2.0% in 2023. 

Despite this optimistic outlook, Piper Sandler acknowledges that certain risks remain. The ongoing litigation regarding Abbott’s Similac Special Care 24 formula and its alleged connection to necrotizing enterocolitis (NEC) is one such challenge. 

While this product represents a small portion of Abbott’s overall revenue (around $9 million in 2023), potential legal liabilities could have a material impact. 

However, Piper Sandler believes that the market has already priced in much of this risk and that the resolution of the litigation may not significantly impact the company’s long-term growth.

Competition is another area of focus, particularly in Abbott’s electrophysiology (EP) business. The emergence of pulse field ablation (PFA) technologies from competitors such as Boston Scientific (NYSE:BSX ) and Medtronic (NYSE:MDT ) could slow growth in this segment over the next few years. Although Abbott is developing its own PFA technology, it is expected to enter the market later than its rivals, which may cause the EP segment to lag until 2026. 

Another factor that could affect Abbott’s performance is foreign exchange (FX) exposure. Given that 61% of its revenue comes from international markets, fluctuations in currency exchange rates could present headwinds, especially as the global economic landscape remains volatile.

Source: Investing.com