Abbott Laboratories

 

ABT Details
 
ABT Unveils Point-of-Care Coronavirus Test: Abbott Laboratories (NYSE: ABT) is involved in the detection, expansion, manufacture and sale of a broad range of healthcare related products. On 27 March 2020, the company announced that the USFDA has provided the FDA’s Emergency Use Authorization (EUA) for its molecular point-of-care test, ID NOW COVID-19, for the recognition of the novel coronavirus. The COVID-19 test runs on Abbott’s ID NOW™ platform and gives rapid results. Notably, the freshly introduced test by Abbott can be utilized in various healthcare settings like physicians' offices, urgent care clinics and hospital emergency departments. The Point-of-Care test will give positive results within a time period of 5 minutes and negative results in just 13 minutes.
 
Q4FY19 Operational Highlights for the Period ended 31 December 2019: ABT declared its quarterly results, wherein the company reported worldwide sales of $8.3 billion, up 7.1% year over year. On an organic basis, revenues increased 8.5% year over year. The company reported adjusted EPS of 95 cents per share, up 17.3% year over year. Notably, the company is set to report its 1QFY20 financial results on 16 April, 2020.
 

Q4FY19 Financial Highlights (Source: Company Reports)
 
Outlook: For FY20, the company expects adjusted earnings from continuing operations to be between $3.55 and $3.65. The company expects organic sales growth to between 7% - 8%. 
 
Valuation Methodology: EV/Sales Multiple Based Relative Valuation

EV/Sales Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The stock of ABT is quoting at $79.45 with a market capitalization of ~$140.1 billion. The stock is currently quoting at the lower band of its 52-week trading range of $61.61 to $92.45.The stock has corrected by ~7.5% and ~0.06% in the last three months and one year, respectively.The company rides on robust operating segments along with strong performance in the emerging markets. Also, the company remains on track to curb the impact of COVID-19 outbreak. Considering the aforesaid facts, we have valued the stock using EV/Sales based relative valuation method. We have taken the peer group - Medtronic PLC (NYSE: MDT), Boston Scientific Corp (NYSE: BSX), Edwards Lifesciences Corp (NYSE: EW), and arrived at a target price of higher single-digit upside (in% terms). Hence, we recommend a “Hold” rating on the stock at the closed price of $79.45, up 0.01% as on 3 April 2020.

 
 ABT Daily Technical Chart (Source: Thomson Reuters)
 
 

Merck & Co., Inc.

 

MRK Details
 
MRK Updates the First Positive Head-to-Head Phase 3 Trial: Merck & Co., Inc. (NYSE: MRK) is a worldwide global healthcare company, which is engaged in offering health solutions through its prescription medicines, biologic therapies, vaccines, and animal health products. On 2 April 2020, MRK stated that KEYTRUDA®, an anti-PD-1 therapy, has massively improved progression-free survival as first-line treatment for advanced microsatellite instability-High (MSI-H) or mismatch repair deficient (dMMR) colorectal cancer.
 
Other Recent Update: Recently, the company and Eli Lilly announced medical service volunteer programs to allow licensed employees to fight against COVID-19 impact, while keeping their basic pay. In another update, the company announced the results from phase 3 VICTORIA trial study, assessing the efficacy and safety of its investigational drug to treat patients with chronic heart failure and stated that its drug significantly reduced the risk of the composite endpoint of heart failure hospitalisation or cardiovascular death. Further, the company stated that in response to curb the COVID-19 pandemic, it is contributing~300,000 masks to New Jersey’s Office of Homeland Security and Preparedness.
 
Q4FY19 Operational Highlights for the Period ended 31 December 2019: MRK declared its quarterly results, wherein the company reported adjusted earnings of $1.16 per share, up 12% year over year.
 
Revenue for the quarter was reported at $11.9 billion, up 8% year over year (9% excluding forex impact). The company reported adjusted gross margin of 72.6%, as compared to 75% reported in the year-ago period. Margins were impacted due to pricing pressure and unfavorable manufacturing variances. Selling, general and administrative (SG&A) expenses stood at $2.8 billion in 4QFY19, an increase of 8% year over year. Research and development (R&D) expenses stood at $2.4 billion, soaring 12% year over year.
 

Q4FY19 Financial Highlights (Source: Company Reports)
 
Outlook: For FY20, the company predicts revenues to be between $48.8 billion – $50.3 billion, whereas non-GAAP earnings are likely to be between $5.62 and $5.77 per share.
 
Valuation Methodology: Price to Earnings Multiple Based Relative Valuation

Price to Earnings Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The stock of MRK is quoting at $76.25 with a market capitalization of ~$193.4 billion.The stock is currently quoting at the lower band of its 52-week trading range of $65.25 to $92.64.The stock has corrected by ~16.44% and ~8.33% in the last three months and one year, respectively. The company remains on track to build its long-term portfolio through the licensing deals in the past few years. Considering the aforesaid facts, we have valued the stock using price to earnings based relative valuation method. We have taken the peer group - Eli Lilly and Co (NYSE: LLY), Pfizer Inc (NYSE: PFE), Amgen Inc (NASDAQ: AMGN) and arrived at a target price of lower double-digit upside (in% terms). Hence, we recommend a “Hold” rating on the stock at the closing price of $76.25, down 0.81% as on 3 April 2020.
 
 
MRK Daily Technical Chart (Source: Thomson Reuters)

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