Abbott shares slip on split expectations
THE ASSOCIATED PRESS October 18, 2012 6:50PM
Abbott Company logo for business and Dan Miller. Company logos.
Updated: December 18, 2012 2:06AM
Shares of Abbott Laboratories slipped Thursday, a day after the company reported third-quarter results and delivered an update on its upcoming business split.
The company reported earnings that edged analyst expectations and represented a jump compared to last year’s third quarter, when several expenses weighed on its performance.
But Citi Investment Research analyst Matthew Dodds said in a research note the results strengthened his belief that the company’s underlying earnings power is slipping even with another sizeable contribution from top seller Humira. Sales of the anti-inflammatory drug rose 15.7 percent — excluding the negative impact of changes in currency exchange rates — to $2.33 billion.
Abbott shares were down $3.14, or 4.6 percent, in early trading Thursday, to $65.90. They had fallen more than 4 percent, or $3.09, to $69.04 Wednesday.
Abbott’s revenue slipped by less than 1 percent to $9.77 billion. Dodds said several products and divisions fell short of Wall Street expectations. The analyst also noted that Humira’s growth outside the United States slowed.
Abbott plans to spin off its pharmaceutical business into a separate company by the end of 2012. The new company, AbbVie, will focus solely on branded drugs, including Humira. The split is meant to free Abbott from the risks and obligations of developing innovative pharmaceutical drugs, leaving it with a more predictable business built around nutritional formula, generic drugs and heart stents.
Jefferies analyst Jeffrey Holford said in a note the stock was pressured because the company announced a lower-than-expected 2013 dividend from AbbVie of $1.60 per share and a higher-than-expected tax rate of 22 percent for the spinoff. He lowered his valuation of AbbVie to $46 per share from $55.
However, Dodds said the dividend split largely fell within expectations. But he also said the tax rate was not expected.