Barclays Upgrades Abbott, Sees 'Selling Overdone'

• Shares of Abbott Laboratories ABT have declined 19.8 percent over the last three months, hitting a low of $39.06 on September 28.
• Barclays’ Matthew Taylor has upgraded the rating on the company from Equal Weight to Overweight, while lowering the price target from $55 to $52.
• Taylor believes that the recent selloff was overdone and that the stock deserves to trade at a premium, given the company’s compelling outlook, strong management team and expected growth.

Analyst Matthew Taylor went on to elaborate that Abbott Laboratories’ “fundamentals continue to be strong, which should result in near best-in-class top-line growth in its large cap medtech peer set, despite EM, FX, and competitive headwinds that could cause weakness on the edges.”

Apart from revenue growth, Taylor also expects the company to continue to see margin opportunities, especially in its diagnostics and nutrition segments, driven by its operational efficiencies and mix.

“We think this could drive ~100bps of margin expansion annually for the next two years, again, better than peers,” Taylor stated.

In addition, the strength of the company’s balance sheet offers investors optionality, since Abbot Laboratories’ first use of cash remains M&A and market volatility leading to a reduction in asset prices.

Despite the above average exposure that the company has to EM, China, India and Brazil, Taylor noted that its exposure is lower than that of its nutrition peers, given that Abbot Laboratories reported robust double digit growth for the last quarter.

However, the EPS estimate for 2016 has been lowered due to expectations of incremental Fx headwinds.