Download Investment Managers: Chris Zakhem, Mengxi (Vivian) Wang, Le

Investment Managers: Chris Zakhem, Mengxi (Vivian) Wang, Le Huong Hoang, Ziqi (Kay) Mai
Position: We own 400 shares at an adjusted average cost of $26.71
Company Overview
Abbott Laboratories (ABT) is a healthcare company that has business in four segments, including
Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Vascular Products.
For Pharmaceuticals, Abbott has a broad brand of products related to various kinds of diseases and is
exposed to the emerging market. The other three segments are sold worldwide. Diagnostics and
Nutritionals are the two major driving force of the revenue of Abbott and have high operating margins.
The Nutritional Products consists of pediatric and adult varieties. Abbott has market-leading technologies
in its Diagnostic and Vascular products.
Industry Overview
The healthcare market looks promising for Abbott, both internationally and domestically from 20152019. The U.S. healthcare spending is projected to increase with constant growth of 5.8% from 2015 to
2019. Moreover, the rising aging population, higher demand for medicine in the world, and the bright
prospect of GDP growth in U.S. and emerging market are important factors boosting the sales of Abbott
in the future. On the other hand, the fact that U.S. dollar is getting stronger also affects the international
business of Abbott, as it presently derives approximately 70% of its revenue from outside the U.S.
Financial Analysis, Projection and Valuation
Abbott is currently trading at $44.76, above the 20 day moving average and below the 200 day moving
average. We have projected Abbott’s revenue to grow about 5.17% this year and 3.75% in 2016, and
long-term growth rate to be 3%. We determined the WACC to be 9.00% with an included risk premium.
For the comparable company analysis, we compared Abbott to Thermo Fisher Scientific, Medtronic, St.
Jude Medical Inc, Medtronic, Stryker, and Boston Scientific Corporation.
DCF
$44.41
Comparable
$46.20
Risks
The company does face risks in its business. Those include: government approval for products, changes
of government regulation, a global decreasing birth rate, research and development failures, patent
expirations, and competitive markets. Because of the intense competitive market, Abbott’s nutrition sales
decreased 4.5% in reported quarter basis 2015. Moreover, as 70% of Abbott sales are from international
markets, the volatility of the dollar vs. foreign currencies also affects their sales and profits.
Recommendation
We recommend holding our 400 shares of Abbott stock. According to our valuation, ABT stock is fairly
priced, but shows promising potential. Also, the current stock price is going above the 20-day moving
average and the third quarter earnings beat analysts’ expectation.