Abbott Laboratories on Wednesday reported weaker-than-expected revenue for the second consecutive quarter, as sluggish sales of its generic pharmaceuticals and continued effects of an overseas recall of its baby formula last summer continued to drag on sales.
Company executives also warned in a morning conference call that its performance in the first quarter of 2014 would likely fall below Wall Street expectations due to the lingering effects of the recall and unfavorable foreign exchange rates that have dogged the company for months.
Investors sent Abbott shares down as much as 5 percent in morning trading before the stock rebounded to $38.25, or down 2.2 percent in the midafternoon.
"We're making good progress, recovering. We're on the right path that we projected," said Tom Freyman, Abbott's chief financial officer, of the effects of the baby formula recall. "But as we said from the very beginning … this is going to cause a very tough first-half comparison in 2014, and that’s what you’re seeing."
Freyman called the negative effect of foreign exchange in the first quarter “particularly acute.”
The company's full-year forecast, however, was in line with analyst forecasts.
"Having the year back-end loaded raised some concerns," said Jeff Windau, an analyst with Edward Jones. "However, we believe Abbott is well positioned as the strong product pipeline and broad international presence should provide long-term growth opportunities."
For the fourth quarter, Abbott said net income from continuing operations climbed 20 percent to $918 million, or 58 cents a share, in line with Wall Street estimates.
Revenue for the quarter was $5.65 billion, up 0.4 percent from $5.63 billion in the same period a year ago, but short of the $5.72 billion analysts expected.
The Lake County-based medical products giant, which spun off its pharmaceutical arm into AbbVie Inc. at the start of the year, said net earnings dropped 44 percent to $589 million, reflecting the separation. Overall earnings per share were 37 cents, down from 66 cents in the fourth quarter of 2012.
Excluding foreign exchange, which had an unfavorable 2.9 percent drag on sales, revenue increased 3.3 percent. Abbott sales were hurt for the second consecutive quarter by the supplier recall in Asia that eroded total worldwide sales growth by about 1.5 percentage points.
Some of its products were pulled from shelves in August when Fonterra, its New Zealand-based supplier, warned that some of its whey protein contained an ingredient that could cause botulism. The warning turned out to be a false alarm, but not before companies like Danone and Abbott yanked their products.
Abbott also announced a plan to repurchase some $2 billion of its stock in 2014, pulling a second lever on trying to bolster its attractiveness to investors. The company in October also announced a 57 percent hike in its quarterly dividend.
The company also said it plans to take special charges of $1.03 per share in 2014, in part because of a tax expense associated with a one-time repatriation to the United States of 2014 international earnings.
The move will "provide that cash here in the U.S. for strategic flexibility and the various things we would want to use it for," Freyman said.
In the past, Abbott has typically kept that income overseas and invested it in acquisitions and to fund expansions into new markets and production. It is slated to open three new production plants this year, including facilities in China and India.
Abbott's diagnostic division reported a sales increase of 5.9 percent, while sales in medical devices rose 2 percent. Established pharmaceuticals -- the branded generic drugs sold internationally that Abbott retained after the spin-off -- sales fell 4.3 percent, a continued soft spot. Sales in the nutrition division, hurt by the international recall, fell 0.8 percent.
firstname.lastname@example.org | Twitter: @peterfrostCopyright © 2014, The Baltimore Sun