Analysts at Morgan Stanley said they see a balanced risk-reward with shares of Abbott Laboratories (ABT) after it split off from its research-based pharmaceuticals business. They see great potential for growth in the nutritional industry.
Abbott Laboratories (NYSE:ABT) and its new spinoff company AbbVie Inc. (ABBV) traded as separate entities for the first time on Wednesday, and today analysts at Morgan Stanley have issued a report on the stocks. They see a balanced risk-reward out of Abbott Laboratories (NYSE:ABT) and expect mid-single digit growth in revenue and double-digit growth in earnings per share. Analysts cite the potential for growth within the nutritional industry, although they said the stock falls in the middle.
As ValueWalk reported on Wednesday, Abbott Laboratories spun off its research-based pharmaceuticals business, naming the new company AbbVie Inc. (NYSE:ABBV). Now Abbott Laboratories (NYSE:ABT) will focus on the nutritional industry.
In their report to investors today, analysts from Morgan Stanley said they’re “more bullish on leverage than growth” because the company’s key drivers are nutritionals and, to a lesser extent, diagnostics. Analysts said Abbott’s peers’ profit margins indicate that there is potential for improvement in both of those sectors. They said the company’s valuation around $30 per share seems fair.
Morgan Stanley placed their bullish case at $36 per share if the company’s profit margins in the nutritional industry accelerate more quickly than they expect. They set their base case at $30 per share and categorized it as profit margins growing less than 100 basis points per year, which would put the company’s earnings per share growth around 10 percent. Analysts listed their bear case at $24 per share with limited earnings before interest and taxes.
In trades on Thursday, shares of Abbott Laboratories (NYSE:ABT) were up more than 3 percent.