Technically, Abbott Laboratories (NYSE:ABT) has been around for decades. But the new Abbott Laboratories stock — the one that no longer contains the drug division spun off as AbbVie Inc (NYSE:ABBV) — has existed for only six months.
Seems like a good time for a checkup.
After sending the drugs, including the world’s best-selling drug, Humira, to AbbVie Inc (NYSE:ABBV), Abbott is left with four divisions:
- Nutrition — probably a low-margin business. How much can you mark up baby formula and muscle powder?
- Diagnostics — interesting, especially with the development of personalized medicine, but it’s the smallest of the four globally, and very little of the sales come from the U.S., where it could probably get higher prices.
- Established pharmaceuticals — using a euphemism for generic drugs sold overseas, doesn’t make them any more interesting.
- Medical devices — it’s a tough business. U.S. sales were down nearly 13% year over year in the first quarter.
The reason Abbott Laboratories (NYSE:ABT) split off AbbVie Inc (NYSE:ABBV) was clear: Independently, Abbott Laboratories stock and AbbVie stock were supposed to grow faster than the combined company.
That might actually turn out to be true, but Abbott Laboratories (NYSE:ABT) got the unsexy slow-growth side of the stock. Since the split, Abbott Laboratories stock has matched the S&P 500, while AbbVie Inc (NYSE:ABBV) has doubled the index’s return.
It seems investors are just uninterested in owning Abbott Laboratories stock. I know I am.
Turning things around
The most interesting division is Abbott Laboratories (NYSE:ABT)’s diagnostic business. The company sells devices that can run different diagnostic tests. Abbott doesn’t break out margins, but it seems safe to assume it’s making more on the tests than it is on the machines, which has proved to be a successful business model. Investors should keep an eye on the ever-increasing options for tests that Abbott is developing. It recently gained FDA approval for a test to genotype hepatitis C infections, for instance.