Abbott plans to separate its Nutrition business, with approximately $8.5 billion in annual sales, by the end of 2027. The proposed separation came alongside a reduction in Abbott’s full-year revenue growth guidance to about 6%, despite accelerating third-quarter sales and earnings growth.
Key Takeaways
- Abbott plans a tax-free Nutrition separation by end-2027, with combined dividends expected to match Abbott’s payout at separation.
- Third-quarter sales rose 7% and EPS increased 9%, but full-year revenue growth guidance was reduced to about 6%.
- Electrophysiology and diabetes care face near-term pressures, while infant nutrition litigation remains unresolved.
Table of Contents
- Abbott Nutrition spin-off would reshape growth and margins
- Stronger third quarter gives way to a lower outlook
- Device launches and diabetes pricing shape near-term prospects
- Cancer diagnostics disruption and litigation remain in focus
Abbott Nutrition spin-off would reshape growth and margins
Chief Executive Robert Ford said a strategic review concluded that Abbott and Nutrition could create greater value independently. He described nutrition as increasingly driven by consumer preferences, wellness trends and retail execution, with investment and innovation requirements different from Abbott’s other businesses.
Management favored a spin-off over a sale because of the significant tax implications of selling the business and a sale timetable that would not be entirely within Abbott’s control.
Chief Financial Officer Phil Boudreau said removing Nutrition would increase Abbott’s sales growth rate by 50–100 basis points, lift gross margin by more than 200 basis points and raise operating margin by approximately 100 basis points. These are expected effects of the planned transaction, not completed improvements.
The separation is intended as a tax-free distribution to shareholders. Management expects both companies to maintain strong investment-grade credit ratings and pay dividends that together equal Abbott’s dividend at the time of separation.
Stronger third quarter gives way to a lower outlook
Abbott reported third-quarter sales growth of 7% and EPS growth of 9%, both accelerating from the first half. Medical Devices sales increased 8%, supported by double-digit growth in electrophysiology and rhythm management, while Diagnostics sales rose 6.5%.
Nevertheless, the revised full-year revenue outlook of about 6% growth implies fourth-quarter growth of just over 8%. Ford attributed the reduction to near-term pressures in electrophysiology and diabetes care.
Electrophysiology growth is expected to slow to around 20%, compared with a previous expectation of 25%, as left atrial appendage market challenges and slower US orders ahead of the Amulet 360 launch affect the fourth quarter. Ford expects total-company growth to accelerate in 2027, but indicated a more conservative approach to initial revenue guidance.
Device launches and diabetes pricing shape near-term prospects
The Volt PFA catheter moved to full US market release in mid-August, and the TactiFlex Duo catheter received FDA approval in September, with a broad US launch expected in the fourth quarter. Amulet 360 received CE Mark, and Ford pointed to a pivotal data readout at TCT.
In diabetes care, management expects low-to-mid-single-digit growth over the next few quarters. International pricing pressure and difficulty reaching more people with type 2 diabetes without expanded reimbursement prompted the revised outlook.
Ford cited a planned December launch of Libre Duo and a significant US payer formulary coverage win effective January 1 as growth drivers. He did not forecast when CMS might expand reimbursement for non-insulin-using people with type 2 diabetes.
Cancer diagnostics disruption and litigation remain in focus
Cancer diagnostics grew 14%. A July cybersecurity event disrupted operations for seven to 10 days and cost about one percentage point of growth.
Cologuard grew at a mid-teens rate. A blood-based colorectal cancer screening test launched in September, although Ford said stool-based testing remains preferred for earlier detection of precancerous lesions.
Infant nutrition litigation remains unresolved. Ford said Abbott settled with 2,000 claimants in August, but resolving the litigation is not a prerequisite for the separation. Management said both companies would be well capitalized to defend their legal positions.
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