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Rapid Covid Tests Can't Keep Abbott Healthy Forever; While demand for the at-home tesRapid Covid Tests Can't Keep Abbott Healthy Forever; While demand for the at-home tests let it beat analysts' expectations, a decline by the medical-device business and broader headwinds sent shares downWall Street Journal (Online); New York, N.Y.Third-quarter sales of the BinaxNow test declined somewhat from a year earlier but were still $1.64 billion. Covid-19 has been a double-edged sword of sorts for Abbott Laboratories, the maker of the popular rapid antigen test BinaxNow. On the one hand, demand for that product has barely let up, allowing the health-supplies company to raise its 2022 adjusted earnings forecast while posting third-quarter revenue of $10.4 billion that far exceeded Wall Street expectations. Its sales of BinaxNow declined somewhat from the same period last year when the Delta variant was raging, but they still came at an impressive $1.64 billion, trouncing Wall Street expectations of about $500 million. On the other hand, Covid-19 is also hurting its business in indirect—and perhaps more important—ways. Its medical-device business saw international sales decline 8.7% for the quarter, with overall division sales down 0.5%. The company blamed the drop on "intermittent Covid-19 lockdown restrictions in China as well as supply constraints in certain areas, most notably electrophysiology." Stripping out the rapid tests, overall sales missed Wall Street's consensus, which perhaps explains the somewhat downbeat reaction Wednesday. The shares were down by around 8% in early afternoon trading. One challenge for investors is that no one knows how long people will keep taking those antigen tests. The company itself is being very cautious, forecasting a meager $500 million in sales in the fourth quarter, which would be a huge sequential decline from the third quarter, even though we are entering winter months. That seems overly conservative, and executives admitted as much during a call on Wednesday, telling analysts that "Covid test sales are stickier than most have assumed." Covid-19 wasn't the only public-health issue affecting earnings. A halt to production at the factory in Sturgis, Mich., that led to a shortage of baby-formula nationwide was partly to blame for a 25% decrease in pediatric sales to $827 million in the quarter. The company resumed production at the facility only during the third quarter. The share-price pressure is perhaps a reflection that bigger economic pressures such as inflation, a strong dollar, supply-chain problems and a slower-growing world are going to be tough headwinds for companies such as Abbott to overcome going forward. Despite its defensive appeal, the stock is now down by about 31% year to date. For Rick Wise, an analyst at Stifel, much of the decline may be because investors came "into the quarter feeling this will be a great one, but there wasn't any 'oh wow' factor." But the company, he says, "got it done in a complicated environment." Complicated is right. A global slowdown may soon outweigh the benefits of a global pandemic for Abbott. |
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