Will the New Abbott Laboratories Outshine Competitors?

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With shares of Abbott Laboratories (NYSE:ABT) trading at around $33.68, is ABT an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Abbott Laboratories engages in the development, manufacturing and sale of health care products worldwide. It recently spun off its research-based pharmaceuticals segment, which is now AbbVie (ABBV). Since that time, some investors have become very bearish on Abbott Laboratories. Are they correct?

Abbott Laboratories relies on its nutritional segment for a significant portion of profits, and a lot of growth should come from emerging markets. Its vascular segment is the most innovative. Therefore, these two segments get the most attention. However, the diagnostics segment shouldn’t be ignored. It had $4.3 billion in sales last year. Abbott Laboratories is lucky that it didn’t sell its core laboratory diagnostics branch to General Electric Company (NYSE:GE) in 2007. It’s expected to see impressive growth from blood screening, hematology and immunochemistry products. The molecular diagnostics segment hasn’t been performing as well as anticipated, but there are 15 new molecular diagnostic products in the pipeline. Point-of-care diagnostics have been performing well, and the point-of-care diagnostics market is expected to see strong growth in the coming years.

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Abbott Laboratories has several Hepatitis C drugs, which go by the names of ABT 450, ABT 330 and ABT 267. Collectively, these drugs have the potential to bring in $5 billion on an annual basis. A lot will depend on competition. The company is currently trading at 9 times earnings. Margins are good, but they’re average for the industry. ROE is 23.23 percent. Operating cash flow is $9.31 billion. Levered free cash flow is $4.86 billion.

Let’s take a look at more important numbers prior to forming an opinion on the stock…

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