ABBOTT LABORATORIES Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Robert Ford emphasized navigating dynamic environments and the benefits of the diversified business model.
• First quarter sales grew high single digits, earnings per share grew double digits. Adjusted earnings per share $1.09, up 11% vs prior year.
• Gross margin expanded 140 basis points, operating margin expanded 130 basis points.
• Pipeline has over 25 key new products forecasted to launch over next three years.
• Details on each segment: Nutrition had 7% growth; Diagnostics saw COVID testing impact; EPD had 8% growth; Medical Devices had varied growth across subsegments.

Segment Performance

• Nutrition: Year sales increased 7%. High single-digit growth in adult nutrition and double-digit growth in US pediatric nutrition.
• Diagnostics: Sales declined 5% due to year-over-year drop in COVID-19 testing sales. Core laboratory diagnostics had low single-digit growth, but excluding China, grew 6.5%.
• EPD: Sales increased 8%, with broad-based growth across markets, led by double-digit growth in more than half of key fifteen markets.
• Medical Devices: Sales grew 12.5%. Diabetes care: continuous glucose monitors $1.7B, +20% growth (30% in US). Electrophysiology: 10% growth. Structural Heart: 15% growth. Rhythm Management: 6% growth. Heart Failure: 12% growth. Vascular: 6% growth. Neuromodulation: began TRANSCEND clinical trial for deep brain stimulation in treatment-resistant depression.

Guidance

• Adjusted earnings per share for Q2 expected to be in range of $1.23 to $1.27.
• Foreign exchange expected to have an unfavorable impact of around 1% on full-year reported sales, with ~0.5% unfavorable impact on second quarter reported sales.

Risks

• Tariffs pose a financial impact, with an estimated few hundred million dollars half-year impact. Uncertainty around how tariffs will affect US and China markets long-term. Need to manage through economic, competitive, and other factors as discussed in annual report risk factors.

Question and Answer

Q: Robbie Marcus asked about the impact of tariffs on financials and guidance.

A: Robert Ford responded that tariffs are being mitigated through manufacturing network optimization, leveraging FX, interest, tax, etc. Estimated half-year tariff impact of a few hundred million dollars, with focus on balancing short-term, medium-term, and long-term mitigation.

Q: Larry Biegelsen asked about the EP franchise and Volt timeline.

A: Robert Ford discussed Volt's European launch, positive feedback, and US approval timeline expectations, aiming for beginning of next year.

Q: Travis Steed asked about tariff impact breakdown and manufacturing network mitigation.

A: Robert Ford explained that tariff impact is evenly split between US and China, with manufacturing network spread across regions (e.g., Libre has 6 manufacturing sites) to mitigate risks.

Q: David Roman asked about diagnostic strategy, China VBP, and M&A.

A: Robert Ford noted diagnostic challenges in China due to VBP, but strong performance elsewhere. M&A considered for devices and diagnostics but focused on organic growth and ROIC.

Q: Vijay Kumar asked about top-line acceleration and gross margin.

A: Robert Ford discussed second half acceleration due to product launches, comps, and lapping VBP impacts. Phil Boudreau added gross margin was better than forecasted, aided by FX.

Q: Joanne Wuensch asked about IVL clinical trial and structural heart products.

A: Robert Ford talked about IVL trial enrollment, expected completion next year, and structural heart's 15% growth with strong portfolio and product launches.

Q: Josh Jennings asked about tariffs and diversified model.

A: Robert Ford emphasized active engagement with industry associations on tariffs and reaffirmed confidence in the diversified model's ability to drive sustained growth.

Q: Marie Thibault asked about Rhythm Management and Aveir rollout.

A: Robert Ford discussed Aveir's rollout progress, early adoption, and next-generation product plans, expecting it to change the pacing market standard.