Jefferies Says It's Buying Abbott Labs Stock On Emerging Market Growth, Valuation

• Abbott Laboratories ABT shares are down 6 percent in the last six months, slipping below the $50 mark on August 19.
• Jefferies’ Jeffrey Holford upgraded the rating on the company from Hold to Buy, while raising the price target from $49 to $55.
• Holford expects growth platforms in the emerging markets to remain robust on account of the defensive nature of the products.

Abbott is “an underappreciated long term defensive growth story,” analyst Jeffrey Holford wrote. He added that the company is expected to generate revenue and EPS CAGRs of 7.1 percent and 12.2 percent, respectively, over 2016-2020. Given this, the stock’s valuation appears attractive.

Despite the deceleration in the emerging markets and currency headwinds, Abbott has significant opportunity for further margin expansion, given that its brands are “relatively insensitive to the economy” and the company has enough local manufacturing infrastructure to offset the currency impact.

“Furthermore, we gained substantial comfort from Abbott management at our recent Global Healthcare Conference in London that the business in emerging markets remains robust and is not expected to experience a slowdown in current conditions,” Holford commented.

The upgraded in rating is partly from a valuation standpoint, following the recent underperformance of Abbott’s shares due to “what we believe are unwarranted concerns on its Emerging Markets exposure,” the Pacific Crest report stated.

Holford expects management to continue to achieve robust EPS growth through sustained margin improvement and capital allocation towards accretive M&A.