By Joseph Walker
Abbott Laboratories continued to struggle in the fourth quarter
with challenges in overseas markets, including the continued
fallout from a recall that has damaged Abbott's baby-formula
products in Asia and a weakened European economy that pressured
sales of generic drugs.
Abbott, which also makes medical devices and diagnostics, said
sales rose 0.4% to $5.65 billion in the quarter from $5.63 billion
in the year-earlier quarter. Net profit fell 44% to $589 million,
or 37 cents a share, from $1.05 billion, or 66 cents a share a year
earlier. Much of the earnings decline was due to the spinoff of the
company's biotechnology drug unit, AbbVie Inc., last year. Through
2013, total sales rose 1.6% to $21.84 billion, or nearly $80
million below the estimates of analysts polled by FactSet Inc.
For 2014, the company forecast per-share earnings in the range
of $2.16 to $2.26; analysts polled by Thomson Reuters had expected
per-share profit of $2.21.
Chief Executive Miles White separated Abbott from its
biotechnology drug business last January with the aim of bolstering
Abbott's share price and growth potential. In Abbott's first year
since the spinoff, the company has stumbled to meet expectations as
it has grappled with difficulties overseas, including the negative
effect of foreign currency exchange, which reduced sales growth by
2.9 percentage points in the fourth quarter.
During a conference call with analysts Wednesday, Mr. White
faced questions about whether investors should still view Abbott as
a growth stock following the announcement that Abbott would buy
back more than $2 billion of its stock in 2014, while also
repatriating $2 billion in overseas earnings to the U.S.--moves
seen as potentially signaling a more conservative outlook.
"In no way do I think we are stepping away from an intention of
growth," Mr. White said. "At the same time, we accumulate a fair
amount of cash and our investors are looking for a return."
Shares of Abbott fell 2.4% to $38.16 on the New York Stock
Exchange in early trading Wednesday. The stock has risen 15.90%
over the past year, trailing both the broader market and shares of
AbbVie, which rose 35.1% over the same period on the strength of
its blockbuster drug Humira and the prospects for its pipeline of
hepatitis C treatments.
One of Abbott's biggest challenges last year was a recall by one
of its baby-formula suppliers, Fonterra Co-Operative Group Ltd,
which led Abbott and competitor Danone SA to take their own
products off the market across Asia. The scare was prompted by a
Fonterra warning that its powdered milk might contain dangerous
bacteria, which ultimately turned out to be a false alarm. The
consequences, however, continue to hurt Abbott.
Abbott estimated the recall cost it $90 million in sales during
the fourth quarter, reducing its overall revenue growth in 2013 by
1.5%. The company said it expected the negative effect of the
recall to carry over into the first half of 2014. Nutrition
products are Abbott's largest product category by sales, and
represent about a third of its total revenue.
Sales in the company's pharmaceutical business, which includes
specialty and branded generic drugs sold overseas, fell 2.9% last
year, primarily because of price and volume pressures in Western
Europe due to austerity measures by governments there, Abbott's Mr.
White said.
Tess Stynes contributed to this article.
Write to Joseph Walker at joseph.walker@wsj.com
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