Strong Diagnostics Product Sales Boost Abbott in 2Q

Abbott Laboratories Inc reported better-than-expected quarterly earnings on Wednesday as demand for its recently-recalled infant formulas began to recover and profit margins improved for other business segments.

Sales of nutritional products, the company's biggest product line which includes Similac infant formula and Ensure beverages for adults, rose 1.6 percent to $1.73 billion, following declines in previous quarters.

"The business seems to be stabilizing," said Edward Jones analyst Jeff Windau. "Customers are getting more comfortable now with the quality of Abbott's formulas, so we expect better growth in the second half of the year."

A recall of pediatric milk formula brands in China and Vietnam last August, due to fears an ingredient provided by an outside supplier might be contaminated, crimped sales of the products by $40 million in the second quarter.

But that was less than the $75 million hit seen in the prior quarter. Abbott said it is quickly recapturing share in the affected markets, having just introduced several new products and by opening a new Similac manufacturing plant in China.

"We're recovering as well as we could in that one-year time frame," Abbott Chief Executive Miles White told analysts on a conference call. "We're getting back to the track we want to be on."

Abbott said it earned $466 million, or 30 cents per share, in the quarter. That compared with $476 million, or 30 cents, in the year-earlier period, when Abbott took charges for cost-saving initiatives and other expenses.

Excluding special items, Abbott earned 54 cents per share, topping Wall Street expectations of 51 cents. The company said the outperformance was due to improved profit margins for its diagnostics and vascular products.

Global company sales rose 1.9 percent to $5.55 billion, a bit above Wall Street estimates of $5.52 billion.

Diagnostics posted the best showing in the quarter, growing 4.8 percent to $1.19 billion, with double digit sales growth in the United States. Sales of medical devices rose 1.2 percent to $1.37 billion.

Abbott early last year spun off its branded patent-protected prescription drugs into a new publicly traded company, Abbvie Inc, but continued to sell generic medicines.

Abbott generics have suffered declining sales over the past year and hurt overall company results. But the flat sales in the second quarter, of $1.22 billion, were a welcome contrast to the 6.6 percent slump seen in the prior quarter.

In a move cheered by investors, Abbott on Monday said it would sell its generics business in developed markets outside the United States to Mylan Inc in a deal valued at $5.3 billion. But Abbott will continue to sell its generic brands in fast-growing emerging markets.

The suburban Chicago-based company raised its full-year profit forecast to between $2.19 and $2.29 per share, from $2.16 to $2.26 per share.

Company shares slipped 0.3 percent at $41.04 in morning trading on the New York Stock Exchange, amid modest declines for the drug sector.