Abbott Laboratories Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Sales and Margin: Second quarter sales increased 6.9% (7.5% excluding COVID testing-related sales). Adjusted earnings per share $1.26, up 11% y/y. Foreign exchange had a favorable 0.5% impact on Q2 sales. Gross margin 57% (+100bps y/y), adjusted operating margin 22.9% (+100bps y/y).
• Product Segments:
  • Nutrition: Adult Nutrition growth due to consumers seeking complete/balanced nutrition and diabetes management solutions.
  • Diagnostics: COVID testing and China volume impacts, but Core Lab Diagnostics grew 8% ex-China.
  • EPD: Strong growth in key 15 markets, biosimilars pipeline with 10 regulatory submissions for launches in 2026.
  • Medical Devices: Diabetes care (Libre sensor growth, Epic collaboration), Electrophysiology (Volt PFA catheter launch, PACTAFLEX-DUo trial enrollment), Structural Heart (TAVR share gains, MitraClip next-gen launch, Tendyne valve FDA approval), Rhythm Management (AVEIR pacemaker growth), Heart Failure (double-digit growth).

Segment Performance

• Nutrition: Sales increased 3.5% in the quarter. Growth driven by Adult Nutrition, with strong demand for Ensure and Glucerna for complete/balanced nutrition and diabetes management.
• Diagnostics: Sales declined 1.5% in the quarter, primarily due to year-over-year COVID testing sales decline and volume-based procurement in China. Excluding China, Core Lab Diagnostics grew 8%.
• EPD: Sales grew nearly 8% in the quarter, driven by strong performance in key 15 markets (surpassing $1B in quarterly sales for the first time) and progress on biosimilars with 10 regulatory submissions across emerging markets.
• Medical Devices: Sales grew 12%, driven by double-digit growth in diabetes care (Libre sensor $1.9B, +19.5% in quarter), heart failure, structural heart, electrophysiology, and cardiac rhythm management.

Guidance

• Third Quarter: Forecast adjusted earnings per share in the range of $1.28 to $1.32.
• Full Year: Expected neutral impact from foreign exchange on full-year sales, with ~2% favorable impact on third quarter sales. Anticipate lapping headwinds next year with strong pipeline launches across businesses.
• Future Outlook: Confident in high single-digit growth and double-digit EPS growth in 2026 as headwinds subside and pipeline drivers kick in.

Risks

• Diagnostics Headwinds: Year-over-year decline in COVID testing sales, volume-based procurement in China, and HIV testing funding impacts creating ~$1B headwind for Diagnostics in 2025.
• FX and Tariffs: Foreign exchange had a favorable impact in Q2 but is neutral for full-year sales; tariffs expected to be a $200 million impact in 2025.

Question and Answer

Q: David Roman from Goldman Sachs asked about 2025 performance, headwinds, and future growth.

A: Robert Ford discussed 2025 headwinds including diagnostics challenges, China volume impacts, and HIV funding, but emphasized lapping these headwinds next year with strong pipeline launches.

Q: Robbie Marcus from JPMorgan asked about Diabetes and EP trends.

A: Robert Ford noted strong Libre growth, international acceleration, and EP double-digit growth, highlighting Volt PFA catheter launch and AVEIR pacemaker momentum.

Q: Robert Marcus from JPMorgan followed up on Diabetes and EP trends.

A: Robert Ford expanded on Libre's market segments and EP's international rollout, including Volt's feedback and AVEIR's conduction system pacing potential.

Q: Larry Biegelsen from Wells Fargo asked about Libre, wearables, and dual analyte sensor.

A: Robert Ford addressed competitive bidding neutral impact on Libre, wearables supporting health behavior, and dual analyte sensor accelerating share gains.

Q: Vijay Kumar from Evercore ISI asked about CRM metrics and P&L guidance.

A: Robert Ford discussed CRM growth, training, and implant metrics, with Philip Boudreau noting tariff and FX impacts on EPS.

Q: Travis Steed from BofA Securities asked about M&A and EPS outlook.

A: Robert Ford spoke about selective M&A strategy and confident EPS growth in 2026 with pipeline drivers.

Q: Danielle Antalffy from UBS asked about Structural Heart trial impact.

A: Robert Ford discussed Structural Heart portfolio investments, Amulet trial progress, and MitraClip label expansion.

Q: Josh Jennings from TD Cowen asked about TAVR franchise and market growth.

A: Robert Ford highlighted Navitor's positive feedback, international growth, and U.S. team expansion for TAVR share gains.

Q: Adam Maeder from Piper Sandler asked about formula litigation and dual analyte sensor.

A: Robert Ford addressed formula litigation neutral revenue impact and dual analyte sensor's clinical work without timing/pricing details.

Q: Matthew Miksic from Barclays asked about M&A strategy.

A: Robert Ford emphasized selective M&A in diagnostics and devices, focusing on strategic fit and ROIC.

Q: Marie Thibault from BTIG asked about biosimilars reach.

A: Robert Ford discussed biosimilars pipeline leveraging existing infrastructure and SG&A for market education in emerging markets.