Abbott Laboratories: A Resilient Earnings Machine Trading at a Discount

In a year marked by economic uncertainty and sector-specific headwinds, Abbott Laboratories (ABT) has quietly carved out a path to sustained growth. With resilient earnings, a diversified portfolio, and a valuation that lags behind peers, Abbott presents a compelling buy opportunity in 2025. Let's dissect the numbers.

Earnings Resilience in a Volatile Market

Abbott's Q1 2025 results underscore its ability to deliver consistent growth even as legacy pandemic-related demand fades. Total sales hit $10.358 billion, a 4% reported increase and 6.9% organic growth, with adjusted EPS rising 11.2% YoY to $1.09. Margins expanded meaningfully: adjusted gross margin hit 57.1%, up 140 basis points, while operating margin rose to 21.0%, a 130 basis point improvement.

Key drivers include:
- Medical Devices: Sales surged 12.6% organically, fueled by diabetes care (continuous glucose monitors), structural heart devices, and electrophysiology tools. The FreeStyle Libre system and TriClip heart valve repair device are standout performers.
- Nutrition: Adult nutrition sales jumped 8.7% organically, driven by brands like Ensure and Glucerna.
- Pharmaceuticals: Strong growth in emerging markets (9.3% organic) offset softness in diagnostics.

Even in diagnostics, where sales fell due to $84 million in pandemic testing revenue (down from $204 million in 2024), Abbott's non-COVID diagnostics grew 0.5% organically, signaling a shift toward recurring revenue streams.

Valuation: A Discounted Leader in a Premium Sector

While healthcare stocks like Intuitive Surgical (ISRG) and Stryker (SYK) trade at P/E ratios of 77x+ and 53x, respectively, Abbott's 17.4x trailing P/E is a relative steal. Even Medtronic (MDT), a direct competitor, commands a 23.6x P/E, while Abbott's adjusted EPS of $5.16 for 2025 suggests it could trade closer to peers at a 20–25x multiple.

Further undervaluation signals:
- EV/EBITDA: Abbott's 21.86x is below its five-year average and the industry median of 15.8x, but this metric is skewed by one-time investments.
- Dividend Strength: With a 53-year streak of dividend increases and a yield of ~1.7%, Abbott offers stability.
- Analyst Targets: The $141.32 average price target (5.16% upside from $134) is conservative given Abbott's growth trajectory and peer valuations.

Sector Leadership: More Than Just a Dividend Stock

Abbott isn't just surviving—it's innovating. Recent milestones include:
- Volt PFA System: CE-marked for atrial fibrillation treatment, with U.S. trials underway.
- Coronary IVL System: Launched in pivotal trials, addressing calcified arteries.
- TRILUMINATE Trial Data: Demonstrated that TriClip reduces heart failure hospitalizations, a major validation for Abbott's structural heart franchise.

The company's $500 million U.S. manufacturing and R&D investment in Illinois and Texas by year-end 2025 underscores its long-term commitment.

Risks, But Manageable

• Diagnostics Softness: China's healthcare procurement programs and the post-pandemic testing slump remain headwinds.
• Currency Fluctuations: Emerging market sales, which grew 9.3% organically, could be volatile.

Investment Thesis: Buy the Dip

At current prices, Abbott is pricing in worst-case scenarios. With 2025 organic sales growth guidance of 7.5%–8.5% and adjusted EPS of $5.05–$5.25, the stock could re-rate as peers trade at higher multiples. The $205.22 fair value midpoint from relative valuation models (using P/E ranges of 28.8x–43.7x) suggests ~52% upside.

Action Items:
1. Buy on dips below $130.
2. Hold for 1–3 years to capture valuation convergence and dividend growth.
3. Avoid if you require high momentum; Abbott is a “slow-and-steady” play.

Final Take

Abbott's blend of defensible franchises (diabetes, heart devices), dividend safety, and undiscounted growth makes it a standout in a pricey healthcare sector. At a valuation that ignores its scale and innovation, this is a stock to buy—not just for 2025, but for the decade ahead.

Risk Rating: 3/5
Hold for: Income investors and long-term growth seekers.