Was Jim Cramer Right About Abbott Laboratories (ABT)? A Fundamental Case for Long-Term Growth

Albert FoxFriday, May 23, 2025 8:09 am ET
21min read

Jim Cramer's bullish stance on

(ABT) has long centered on its diversified healthcare portfolio, superior diabetes technology, and resilient leadership. As of May 2025, with Abbott's stock up 31.65% over the past year, the question arises: Was Cramer's bet on ABT justified? Let's dissect the fundamentals, valuation, and growth catalysts to determine if this healthcare giant remains a compelling buy.

Cramer's Thesis: A Recap

Cramer's recommendations since 2024 emphasized three pillars:1. Diabetes Dominance: Abbott's FreeStyle Libre continuous glucose monitor (CGM) outperforms competitors like Dexcom, driven by cost efficiency and user adoption.2. Legal Resolution: Ongoing lawsuits, including those related to infant formula, would be resolved by 2025, lifting overhang on the stock.3. Hedge Fund Support: Institutional ownership (66 hedge funds as of Q4 2024) signals confidence in Abbott's defensive, recession-resistant profile.

Fundamentals: Strong Execution and Growth

Q1 2025 Results: Abbott delivered:- Revenue: $10.36 billion (+4% Y/Y), with 8.3% organic growth excluding pandemic testing.- EPS: $1.09 (beat estimates by $0.02), reflecting margin expansion and cost discipline.- Key Segments: - Medical Devices: Grew 12.6% organically, fueled by Libre sales (up 22% globally) and new approvals like the Volt PFA System (CE-marked in March 2025 for atrial fibrillation treatment). - Nutrition: Rose 6.8% organically, driven by pediatric and adult nutrition products. - Diagnostics: Faced headwinds from declining pandemic testing sales (-7.2% reported) but showed resilience in non-COVID offerings.

Valuation: Priced for Growth or Overvalued?

  • Forward P/E: ~30x (vs. 25x for the S&P 500 Health Care sector). Critics argue this reflects high expectations, but Cramer's defense holds water:
  • Libre's scalability: The CGM market is projected to hit $15 billion by 2030, with Abbott commanding ~30% global share.
  • Margin expansion: Adjusted operating margins rose to 21.0% in Q1 2025, up 130 bps Y/Y, driven by cost savings and pricing power.
  • Dividend Strength: A 405-consecutive-quarter streak ($0.59/share) and 53-year dividend growth track record make ABT a defensive income play.

Growth Catalysts: Beyond Diabetes

  1. Volt PFA System: CE approval in Q1 2025 opens a $2 billion addressable EU market. U.S. trials (TECTONIC) for coronary lithotripsy could expand its reach further.
  2. Legal Clarity: The May 2025 summary judgment win in the Mar v. Abbott case (premature infant formula lawsuit) reduces litigation risk, with ~$200 million in reserves already set aside.
  3. Manufacturing Investments: $500 million allocated to new facilities in Illinois and Texas (online by end-2025) will boost production capacity and R&D.
  4. Global Diversification: Emerging markets (e.g., Asia-Pacific) contributed 9.3% organic growth in Established Pharmaceuticals, signaling long-term opportunities.

Risks to Consider

  • Regulatory Scrutiny: Ongoing lawsuits (e.g., Similac contamination class action) could resurface, though the recent legal win is a positive signal.
  • Competitor Pressure: Dexcom's next-gen CGM and Medtronic's innovations challenge Abbott's diabetes lead.
  • Economic Sensitivity: A severe recession might dampen discretionary healthcare spending, though Abbott's defensive profile mitigates this risk.

Conclusion: A Buy for Long-Term Investors

Jim Cramer's thesis on Abbott Laboratories has held up remarkably well. The company's strong execution, legal progress, and diversified growth engines justify its valuation. While AI stocks may offer short-term volatility, ABT's steady fundamentals—including a 23.5%–24% operating margin target for 2025 and a dividend yield of ~1.4%—make it a core holding for income-focused and growth investors alike.

Actionable Takeaway: With Abbott trading at $135.55 (as of May 19, 2025) and a 52-week high of $145, investors should consider averaging into the stock on dips below $130. For those seeking stability in a volatile market, ABT's blend of innovation, resilience, and cash flow remains unmatched in healthcare.