Morgan Stanley Upgrades Abbott to Overweight Based on Reacceleration

In a report published Monday, Morgan Stanley analyst David Lewis upgraded

from Equal-weight to Overweight based on reacceleration. Lewis noted that Abbott's 2015 revenue is expected to grow more than 100 bp faster than the company's large cap peers. The analyst added that underperformance in 2013 creates an opportunity into 2014-2015. Lewis expects Nutrition and emerging markets concerns and revenue pressure to fade this year supporting revenue and EPS growth. Morgan Stanley reported that organic growth is expected to accelerate from approximately 3% in 2H13 to approximately 6% in 2H14 as “Mid single digit growth is sustainable beyond near-term quality disruptions in Nutritionals, and there is room for upside with execution in China, with the medical device pipeline, and a concerted effort to reaccelerate EPD with the cadence of product registrations.” The analyst further reminded investors of Abbott's 57% dividend increase to a 2.7% yield. Lewis also commented on the nutritional slowdown. The analyst wrote, “The Fonterra disruption (~$190mn of 2H13 revs) looks priced in, and execution in China and with the Adult pipeline ($300- 700mn opportunity) could drive upside to our 8-9% growth forecast. In our view, recent growth trends do not reflect the potential for stronger growth on expanding international market mix relative to peers (45% of sales in the US, which is only 20% of the worldwide market).” Shares of Abbott Laboratories closed at $38.64 on Friday and has traded as high as $39.69, up 2.717%.