Argus Says Abbott Laboratories Shares Favorably Valued Despite 'Heightened' M&A Risks

That said, the brokerage has concerns regarding the "heavy lift" required to complete and integrate two large acquisitions on the horizon: Alere Inc ALR and St. Jude Medical, Inc. STJ. Argus noted that Abbott has tried to end the Alere deal "due to concerns about Alere's financial reporting."

"Although we see heightened risks for the company's planned acquisition of Alere, we expect both the Alere and St. Jude Medical deals to provide Abbott with additional growth assets," analyst David Toung wrote in a note.

Earnings

On the earnings front, Abbott posted adjusted EPS of $0.55, which beat the consensus forecast by $0.02. Management's guidance called for EPS of $0.52–$0.54. Revenue rose 3.2 percent to $5.33 billion, above the consensus of $5.24 billion.

Related Link: Focus On Abbott Labs Remains On Pending Deals

Abbott reaffirmed its 2016 adjusted EPS guidance of $2.14–$2.24. This forecast assumes operational sales growth in the mid-single digits, an adjusted gross margin of 57 percent, R&D spending of 6.5 percent of sales, and adjusted SG&A expense of 34 percent of sales.

Toung maintains his adjusted EPS estimates of $2.23 for 2016 and $2.58 for 2017.

Abbott shares trade at 16.9-times Argus' 2017 EPS estimate, below the average multiple of 18.7 for its coverage universe of med-tech stocks.

"We think this is an attractive valuation for ABT, despite the company's current risks, and that it does not fully account for the value of the assets being acquired from Alere and St. Jude," Toung added.

At time of writing, shares of Abbott were up 0.16 percent at $43.67.

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