Why Abbott Laboratories (ABT) Remains a Buy Despite Diagnostic Segment Weakness

In an era marked by macroeconomic volatility and shifting healthcare dynamics, investors often seek companies that combine defensive qualities with growth potential. Abbott Laboratories (ABT), a global healthcare leader, fits this profile. While its diagnostics segment faces headwinds from post-pandemic normalization, the company's strategic resilience—rooted in MedTech innovation, robust organic growth, and a defensible dividend—positions it as a compelling long-term investment. UBS and other analysts have reaffirmed their confidence in ABT, citing its ability to offset short-term challenges with long-term diversification and operational strength.

Strategic Resilience in MedTech: A Growth Engine

Abbott's MedTech division has emerged as a cornerstone of its strategic resilience. In Q2 2025, the segment reported 12.2% organic growth, outpacing the 11.2% consensus estimate. This performance underscores the strength of Abbott's product pipeline, including the VOLT system for cardiac rhythm management, the dual analyte sensor for diabetes care, and the Aveir leadless pacemaker. These innovations are not just incremental improvements—they represent paradigm shifts in patient care, driving high-single-digit growth projections for years to come.

UBS analysts highlight the MedTech segment's ability to absorb broader market uncertainties. For instance, while China's volume-based procurement policies have pressured diagnostics revenue, the company's diversified MedTech portfolio—spanning cardiology, diabetes, and neurology—has delivered double-digit growth in electrophysiology (EP). This diversification ensures that even if one area stumbles, others compensate, creating a buffer against macroeconomic shocks.

Dividend Strength: A Pillar of Stability

Abbott's dividend history is a testament to its financial discipline and shareholder-centric philosophy. The company has raised its dividend for 53 consecutive years, with a recent 7.3% increase to $0.59 per share in Q2 2025. At a current yield of 1.86–2.07%, ABT offers a compelling income stream for investors, particularly in a low-yield environment.

What makes this dividend sustainable? A 28.61% payout ratio and a conservative debt-to-equity ratio of 0.27 indicate ample capacity to maintain and grow payouts. Analysts like Vijay Kumar (Evercore ISI Group) and Jayson Bedford (Raymond James) have upgraded their price targets to $145.00 and $142.00, respectively, citing the dividend's defensiveness and the company's ability to reinvest cash flow into high-margin MedTech projects.

Analyst Confidence and Market Position

The broader analyst community has reinforced ABT's buy rating. As of July 2025, nine firms—including RBC Capital, Piper Sandler, and Barclays—have upgraded or maintained positive outlooks. The average 12-month price target of $143.56 implies a 5.39% upside from current levels, with some analysts projecting gains of up to 28% (e.g., the $159.00 high estimate). This optimism stems from Abbott's ability to navigate diagnostic challenges through innovation and market expansion.

For example, while diagnostics revenue declined due to reduced post-pandemic testing demand, the company's global nutrition and established pharmaceuticals segments have offset these losses. Abbott's 60% international sales exposure further insulates it from U.S.-centric risks, allowing it to capitalize on emerging markets and regulatory tailwinds.

Why ABT Stands Out in a High-Uncertainty Environment

The healthcare sector is inherently cyclical, but Abbott's diversified model mitigates this risk. Unlike single-segment peers, ABT's four core divisions—diagnostics, MedTech, pharmaceuticals, and nutrition—create a natural hedge. When one area faces headwinds (e.g., diagnostics), another gains momentum (e.g., MedTech). This balance is critical in a high-uncertainty macroeconomic climate, where inflation, interest rates, and geopolitical tensions can disrupt sector-specific plays.

UBS and other analysts also point to Abbott's 57.0% adjusted gross margin and $11.1 billion Q2 revenue as evidence of its operational resilience. These metrics reflect efficient cost management and pricing power, particularly in MedTech, where demand for advanced medical devices remains robust.

Investment Advice: A Buy for Income and Growth

For investors seeking a blend of income and growth, ABT offers a rare combination. Its MedTech-led innovation ensures long-term value creation, while its dividend provides a reliable income stream. The recent upgrades from analysts and the company's inclusion in the S&P 500's “Dividend Kings” list further validate its track record.

However, investors should monitor the diagnostic segment for signs of recovery or further deterioration. That said, Abbott's strategic focus on R&D (12% of revenue) and its ability to pivot quickly—such as accelerating the VOLT system's commercialization—mitigate these risks.

In conclusion, Abbott Laboratories' strategic resilience, MedTech growth, and defensible dividend make it a standout in today's uncertain market. While diagnostic challenges persist, the company's diversified business model and innovation pipeline ensure it remains a buy for both income-focused and long-term growth-oriented investors.