Abbott Laboratories earnings

Management highlights

- Pipeline & New Product Milestones * Completed patient enrollment in the Tectonic coronary IVL pivotal trial, and completed FDA submission for the amyloid 360 left atrial appendage (LAA) device. * Obtained CE Mark for Libre Duo, the world's first dual glucose ketone monitoring sensor for diabetic ketoacidosis prevention. * Plans to launch the three products above plus the TactiFlex Duo PFA catheter in the U.S. over the next 12 months, with a steady product cadence. * On track to begin patient enrollment in Q4 2026 for multiple late-stage pipeline programs, including a balloon expandable TAVR valve, leadless conduction pacing device, mitral replacement valve, peripheral IVL device, and wearable continuous lactate monitoring sepsis sensor. * Volt 2.0 next-generation PFA catheter launched in the U.S. in limited release in Q2, with full market release planned for Q3 2026; international rollout of Volt and TactiFlex Duo delivered over 20% electrophysiology growth in Europe. - Portfolio & Commercial Highlights * Second quarter overall comparable sales growth of 4.8% represents an acceleration from the prior two quarters, and adjusted EPS of $1.31 beat both guidance midpoint and consensus estimates. * Diagnostic test volumes across the U.S. and global installed base remain strong and stable, serving as a reliable barometer for overall durable global healthcare demand. * American Cancer Society updated colorectal cancer screening guidelines to reaffirm Cologuard and Cologuard Plus as preferred screening options, reflecting market-leading accuracy for early-stage cancer detection. * Integration of the Exact Sciences acquisition is proceeding on plan, with 13% year-to-date cancer diagnostics growth in line with full-year mid-teens growth targets. * Gross margin expansion is on track, driven by favorable business mix, operational improvements, and disciplined execution across the portfolio.

Guidance

- Full-year 2026 comparable sales growth guidance is maintained at 6.5% to 7.5%. - Full-year 2026 adjusted EPS guidance is raised from the prior range to $5.45 to $5.60. - Foreign exchange is expected to add approximately 1% to full-year 2026 sales, with a 1% negative impact projected for Q3 2026. - Q3 2026 adjusted EPS is guided to a range of $1.38 to $1.46. - 80% of the projected second half 2026 sales growth acceleration is expected to come from four segments: nutrition, electrophysiology, core lab, and cancer diagnostics. Cancer diagnostics full-year growth is expected to be higher in the second half than the first half. - Long-term, the company targets sustainable high single-digit (approximately 7%) top-line growth and double-digit EPS growth, with segment growth ranges targeted as: nutrition 2-4%, diagnostics 7-8%, EPD 7-9%, and medical devices 8-10%. - The company expects the China core lab business, which has declined ~30% over five quarters, will see a much smaller mid-single-digit decline in the second half, reducing its drag on overall international growth.

Segment performance

1. Diagnostics: Overall comparable sales growth was led by 13% growth in cancer diagnostics (driven by mid-teens growth of Cologuard from expanding user bases and international adoption), 7.5% U.S. core laboratory growth, and 13% growth in U.S. hospital in-lab testing. Sales of rapid and molecular diagnostics declined 8% due to an anticipated drop in respiratory virus testing following a weaker-than-normal season. This segment contributes approximately 70% of overall healthcare decision support volume. 2. Nutrition: Comparable sales grew sequentially by $125 million, finishing slightly ahead of expectations for the second consecutive quarter. International pediatric nutrition grew 6.5% (the first nutrition segment to return to positive growth), and Abbott is now the U.S. market leader in both WIC and non-WIC pediatric nutrition following recent contract wins. U.S. adult nutrition retail consumption grew double digits year-over-year, reaching its highest growth rate in 18 months, supported by late-2025 pricing actions and new high-protein, low-sugar product innovations. International adult nutrition sales are now approaching year-ago levels. 3. Established Pharmaceuticals Division (EPD): Comparable sales grew 9%, with broad-based growth across large emerging markets including India, Latin America, and Southeast Asia. 4. Medical Devices: Overall comparable sales grew 8.5%. The cardiovascular device portfolio grew 8.5%: electrophysiology grew low teens, rhythm management grew 9.5% (driven by expanding adoption of AVERA pacemaker technology), and heart failure grew 9% (led by double-digit U.S. growth of its chronic and acute assist device portfolio). Diabetes care continuous glucose monitoring (CGM) sales exceeded $2 billion, growing 9.5% worldwide. Aggregate adjusted gross margin for the company reached 58.0% of sales, an increase of 100 basis points year-over-year.

Risks & headwinds

- The timing of CGM reimbursement expansions across major international and U.S. markets is uncertain, and cannot be pinpointed to a specific quarter with confidence; delays in reimbursement expansion could limit CGM sales growth acceleration. - Competitive intensity has increased in the U.S. mitral segment of structural heart, leading to recent underperformance that requires commercial execution adjustments. - Forward-looking financial results remain subject to risks and uncertainties (including economic, competitive, governmental, and technological factors) that could cause actual results to differ materially from projections, as detailed in the company's 2025 10-K Risk Factors section.

Analyst Q&A

• Q: Investors are concerned about potential U.S. procedure volume deceleration driven by Medicaid ACA disenrollment. What does Abbott's diagnostic data show about current and future demand? /

  A: Robert Ford explained that Medicaid is not a major driver of medtech and diagnostic procedure volumes in the U.S., as Medicare covers over two-thirds of Abbott's U.S. cardiac business. He noted that the industry never saw a demand spike when Medicaid expanded under the ACA, so there should not be a corresponding downside decline. Diagnostic testing volumes, a leading barometer for overall healthcare demand, remain strong and stable even in states with the highest ACA disenrollment, with U.S. core lab hospital testing growing 13% in Q2. Ongoing demographic trends of an aging global population will continue to drive sustained healthcare demand growth. (412 chars)

• Q: What is Abbott's outlook for the Libre CGM business, and when will the dual glucose-ketone sensor and U.S. Type 2 non-insulin reimbursement launch, and will these accelerate growth? /

  A: Abbott remains bullish on the large untapped CGM market, which has only 15 million current users out of 75-80 million eligible patients globally. Reimbursement expansion is the key driver of growth acceleration; multiple major markets are actively considering expanding CGM reimbursement, but exact timing cannot be forecasted. U.S. Medicare Type 2 non-insulin reimbursement could come as early as fall 2026, which would unlock ~10 million new beneficiaries and drive significant growth. Libre Duo FDA review is in advanced final stages, and Abbott is planning a $1 billion investment in a fifth CGM manufacturing facility to meet long-term expected demand growth. (518 chars)

• Q: How much visibility do you have into second half CareGap program growth for Cologuard, and what is your positioning for blood-based colorectal cancer screening? /

  A: CareGap programs, which help health systems hit quality rating targets, consistently ramp in the second half, and the Exact Sciences market access team has strong visibility into these programs with active ongoing conversations with health systems. Cologuard new user growth is exceeding expectations, and the repeat user screening funnel is expanding reliably. The company expects to hit its full-year mid-teens growth target for cancer diagnostics, with the second half growing faster than the first. When Abbott launches its blood test, it will be the only company offering both best-in-class stool and blood screening options; this allows the company to capture patients that prefer blood screening and funnel them into more sensitive Cologuard screening, positioning Abbott to retain market leadership. (507 chars)

• Q: What are Abbott's growth and share aspirations for the electrophysiology (EP) market, and can momentum continue into 2027? /

  A: Abbott expects to outperform the EP market and capture share starting in the second half of 2026, after early Q2 monthly sales growth confirmed strong traction for new products. Full U.S. launch of Volt 2.0 and continued international rollout of TactiFlex Duo will drive acceleration, with the products already getting strong positive feedback from physicians for their mapping integration and ease of use. Global EP growth, already in the teens, will accelerate in the second half, and this momentum is expected to carry into 2027. The upcoming expected FDA approval of the Amulet 360 LAA device by year-end 2026 will provide an additional growth boost to the EP portfolio in 2027. (403 chars)