The stock of Abbott Labs (NYSE:ABT) enjoyed an incredible run up until the bear market of 2022

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The stock of Abbott Labs (NYSE:ABT) enjoyed an incredible run up until the bear market of 2022, when it was completely decimated (see graphic below). The share price reached a peak at the beginning of the year, but it has fallen by 25% since the beginning of the year.

It is performing worse than both the broad gauge of the healthcare business known as the Vanguard Health Care ETF (VHT) as well as the overall performance of the S&P 500.

Shareholders were taken aback to hear that from the corporation, but the underlying factors appear to account for the decline in the stock price. I will explain why that assertion is correct and then examine what the future holds for Abbott in its current form.

Abbott stock and healthcare services

It has been brought to everyone’s attention that the stock of Abbott has a fantastic run for a considerable amount of time. The business provides a wide variety of health care services, such as diagnostics, nutritional care, generic medicine production, and medical equipment, and it generates a significant amount of revenue from free cash flow as a result of these activities.

Investors have a good possibility of gaining money and a low danger of losing money because Abbott is in a strong financial position and continues to spend money on research and development. The next thing you know, there is a pandemic that is spreading over the globe.

Taking all of this into consideration, the sales and profits for the fiscal year 2023 will be as follows: The graph demonstrates that the sales projections for FY2023 are lower by 9% compared to FY22, and that the earnings projections for FY2023 are also lower by 16% compared to FY22, coming in at just $4.38 per share.

The stock was last seen trading at a price of $103.87 on Friday, which is 23.7 times more than the average price on the market. Because its yield is so low at the moment (only 1.81%), I do not believe that ABT is now a very good investment.

The most recent quarter results indicate that the company “exceeded” expectations, despite the fact that sales were 4.8% lower than the same time last year and the company predicted a steep drop in Covid-19 testing sales (to just over $0.5 billion in Q4) in spite of these facts, the company “exceeded” expectations. However, the midpoint projection for EPS in FY22 increased from $4.90 to $5.20 from the previous year.

Expectations about ABT being able to successfully handle the current situation and return to the path of growth

On the other hand, in the longer run, it is anticipated that ABT will be able to handle the current situation successfully and return to the growth trajectory it had been following previously.

This will be driven by the company’s historically innovative pipeline, which includes the Freestyle Libre 3 one piece applicator in the company’s strong Diabetes Care medical device business and expected new structural heart devices, from which ABT should benefit from the addition of the St. Jude portfolio. U.S. sales of the Freestyle Libre 3 rose 40% in the third quarter of this year.

Two potential dangers are a sluggish recovery in the operations associated with medical devices and a reduction in demand for Covid-19 testing that occurs more quickly than anticipated.

Additionally, there are reasons for shareholders to have doubts that the issues that occurred at the company’s Sturgis plant with the production of infant formula have been fixed permanently (not ABT has announced plans for a new nutritional manufacturing facility at an unnamed location).

ABT is suffering losses not only because of the strength of the U.S. dollar but also because of its vulnerability to adverse effects of foreign exchange.

Among the areas in which the corporation may perform more effectively is in the production of branded generic medications, which stand to gain from the robust growth in developing nations (established pharmaceuticals’ exports expanded by 12% on an organic basis in the third quarter).