BMO On Abbott Labs: 'It's Likely Time For The Stock To Take A Pause'

BMO downgrades Abbott Laboratories ABT to Market Perform from Outperform as shares are trading near the brokerage’s $48 price target.

Abbott shares have outperformed year-to-date, increasing 19 percent versus the S&P 500’s 6 percent. BMO views some of this as a “clearly a catch-up trade” following the stock’s worst performance in 2016.

“With ABT trading within spitting distance of our price target, the STJ acquisition closed and integration ahead, and the ALR acquisition pending, we believe it is likely time for the stock to take a pause,” analyst Joanne Wuensch wrote in a note.

Shares are trading at 18.4x 2017 in line the peer group’s average of 18.4x BAX and Edwards Lifesciences Corp EW). The analyst said when compared to revenue growth rates, they're trading nearly on the regression line.

Commenting on Abbott’s request in December to terminate its acquisition of Alere, Wuensch said Alere is a very different business today than it was a year ago, reflecting headwinds from the INRatio voluntary recall and Arriva reimbursement revocation.

Wuensch noted further upward momentum for Abbott will come from integration of St. Jude, execution on its core franchises (including a recovery in its Nutritionals business), and clarity regarding Alere.

“Please do not read into this downgrade that there are larger issues at hand; we are simply stepping aside in anticipation of more limited upside relative to other stocks in our coverage universe,” Wuensch added.

At last check, shares of Abbott fell 1.23 percent to $44.97. The analyst maintained her price target of $48.

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