Barclays Likes Abbott Laboratories, Whether Acquisitions Close Or Not

Barclays analyst Matthew Taylor likes Abbott Laboratories ABT irrespective of whether the company closes their acquisitions of Alere Inc ALR and St. Jude Medical, Inc. STJ. The brokerage reiterated its Overweight rating and $48.00 price objective on Abbott shares.

The analyst said that there could be two scenarios following the acquisitions of two companies by Abbott. The first scenario would be that Abbott would close the two acquisitions of Alere and St. Jude. In the second scenario, the company would close its acquisition of ST. Jude, but would walk away from Alere.

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In the third scenario, which the brokerage viewed as very unlikely, Abbott does not close on either acquisition and remains a stand-alone firm. Even then, Taylor thinks that the stock looks cheaper.

Strengthening his argument for the stand-alone company, the analyst said, "By our estimates, on a stand-alone basis (without ALR or STJ) ABT is trading at ~15.6x P/E, vs about 18.6x for its large-cap medtech peers, including BDX at 17.4x, BCR at 20.2x, MDT at 18.2x, and BAX at 23.3x. Currently, we model ALR potentially adding $0.12 of accretion to ABT (vs. guidance of $0.12 $0.13), and 2017 CASH EPS of $2.54 (on this number, ABT trades at 14.9x)," the analyst wrote to his clients.

The brokerage said that in its view, Abbott has been conservative on the bottom line and think that this could lead to a beat-and-raise dynamic through the remainder of the year. Barclays continues to like the Abbott story due to compelling valuation, exposures to growing markets, strong pipelines and room for OM expansion.

At Friday's Close

• St. Jude closed down 0.38 percent at $76.44.
• Alere closed down 0.31 percent at $42.30.
• Abbott closed down 0.32 percent at $37.39.